I recently received an email from the folks behind the Meetings of the Minds conference asking if I’d participate in a group blogging event they were doing by writing a post on the topic of “How can cities better connect all their residents to economic opportunity?” As this is a topic I personally care quite a bit about, I was happy to do so. They will be linking to responses to other people’s answers should you be interested.
Firstly, what is economic opportunity? Simply put, I’ll define it as a) a job, b) a better job, or c) an opportunity to start a business. There are a number of possible avenues one could suggest for making one of these outcomes more likely: better education, better transportation, migration assistance (which I’ve written about before), and more.
But many of those are difficult to implement, uncertain in their result, long term to realize benefits, and require money that we don’t have. That doesn’t mean we shouldn’t tackle them, but I can’t help but ask: what can we do that would be relatively fast to implement, provide jobs and entrepreneurship opportunities where people already are (particularly those who are lacking a decent job today), and which has a relatively high likelihood of payoff?
In my view overwhelmingly the number one thing we can do that fits this is to pare back the local regulatory burden on small business. I say local because affecting federal or state regulations involves making change at levels of government that are hard to move. Local regulations are mostly within the control of local political leaders. Changing them doesn’t require spending a lot of money. In fact, eliminating regulations might actually save the government money. Change a regulation and it’s changed immediately, and without a lag. It seems intuitive that lighter touch regulation would help small businesses launch and thus have some benefit.
There always are possibilities of unforeseen problems, of course, which should be watched for. And actually, significant improvement can be made without implementing some “anything goes” environment. The goal isn’t necessarily to have low standards. Rather, we can have high standards. But they have to operate objectively, transparently, and predictably, and in a timely fashion. And they have to be things businesses can realistically be expected to do without seeking special exemptions.
Why focus on small businesses? Because starting a small business is fastest path to the middle class in many of our cities today, cities that are often places where the middle class is getting killed. As the NYT recently put it, the King can’t even afford Queens anymore. What we’re seeing in cities is a bifurcated economy with lots of high end jobs and lots of low end service class jobs, but shrinking middle class employment prospects. Major large scale manufacturers aren’t coming back, so the idea of traditional work at the plant is largely gone.
So what’s left in the middle? There are basically three things: 1) government employment (which is shrinking because we’re in a fiscal squeeze 2) skilled trades (a viable path more people probably should follow, but sometimes with its own limits such as having a connection to get you into the union) 3) start a business to create your own opportunity.
Regulatory change is targeted right at #3. Let’s make it easy for people to start businesses and support the best path to the middle class we have. And also the best path to creating traditional employment in city neighborhoods where high end banks and internet companies and such aren’t setting up shop. Many of these neighborhoods have seen their job base obliterated. By reducing the barriers to entry and success in business, we are helping people create their own jobs – and maybe to create jobs for others down the road.
There’s only one major challenge to local small business regulatory relief – political will. Change isn’t necessarily financially difficult, it’s politically difficult. But how many mayors are championing small business? Next to none. Compare how much effort big city mayors put into improving their business climate for traditional small businesses vs. say select segments like tech, and you see right away where the priorities are.
The stories of the insane difficulties small businesses have to go through in places like New York, Chicago, and San Francisco are incredible and widely known but rarely feature in the urbanist discourse unless it’s a hip establishment like a frozen custard stand, a high end shared kitchen, etc. When even a guy like Matthew Yglesias experiences pain trying to set up his one man shop, imagine how hard it must be for everybody else? We have no clue what lower income, minority, and immigrant entrepreneurs must be going through to pursue their dream of starting a business.
What we need is for America’s mayors to stand up and make it a priority to start whacking away at this stuff. Waive fees for the first year for most permits (easy to do by charging in arrears). So many small businesses don’t even make it a year. Let’s give them at least that long to survive before we start socking them. Create a single point of contact for permit checklists and safe harbor protections for businesses that do what this office tells them. A true one stop shop would be best, but that’s likely harder than we think given the different agencies involved, but why not start by at least having someone who authoritatively tells you want agencies you do need to talk to and which permits you do need? Price permits at the cost of administering the permitting and compliance system. Hold management accountable for timely actioning. Use electronic forms wherever possible. The list goes on.
Part of this is simply resisting the urge to pile on one regulation after the next. For example, a recent urbanist darling is banning plastic bags. The impact on the environment will be almost precisely zero, but it’s just one more thing businesses have to deal with. As Rhode Island Builder’s Association Executive Director John Marcantonio put it, “It’s not one specific regulation, it’s death by a thousand paper cuts.” Before adding on a new regulation, we should be sure there’s an absolute, bona fide need to. Because if we don’t, then over time we’ll accrete an absolute mess that makes it way too difficult to do things we actually want people to do.
I’d go so far as to that that if you’re a mayor who isn’t putting a serious focus on improving the regulatory climate for small business, you’re not serious about retaining or building a middle class and stopping the development of a two tier economy. Especially in big cities this is a huge, well known need. There’s no excuse for mayors of either conservative or progressive bents not putting a major push behind making it happen.
Aaron M. Renn is an independent writer on urban affairs and the founder of Telestrian, a data analysis and mapping tool. He writes at The Urbanophile, where this piece originally appeared.