"Small firms should be subject to less red tape than large companies."
At first blush that makes sense. However, if you do that, then you end up putting a tax on growth.
In the United States, for example, there are numerous federal statutes and regulations[1] (and some state ones as well, I believe) that exempt companies or employers with fewer than X employees; most commonly "X" is 50, but in some instances it is 15, and I think in a few instances it is something like 30 or 35. (I used to keep a list of such statutes and regulations, but no longer.) In consequence of this approach and practice, many companies deliberately decline to expand and grow, choosing instead to remain just below some applicable threshold (most commonly the 50-employee one) in order to remain exempt from the additional regulations and the vastly increased cost of regulatory compliance that would be incurred by going above the threshold. In effect, the government has erected a series of "speed bumps" standing in the way of job creation, and these speed bumps — taken together — end up having a substantial retardant effect.
It certainly is true that, as an Anonymous Coward pointed out above, larger firms have an inherent and substantial advantage in complying with regulations in comparison to their smaller competitors, due to economies of scale:
"It's probably also not a coincidence that red tape will be less of a problem for larger, more established — and politically more powerful and influential — businesses that have the economies of scale which make dealing with it easier — and thus, obviously, give[] them a comp[eti]tive advantage against smaller rivals who can't justify employing dedicated staff for that purpose."
This is obviously and intrinsically unfair, and unfortunate for the economy, and it also is why large businesses so often end up cutting deals with politicians and bureaucrats, acquiescing in regulations that they will be able to handle in stride (passing some of the cost on to their customers) but that will hobble — and ultimately protect them from — their smaller competitors and potential competitors.[2]
But there is no good solution to this problem. Larger firms will always have an advantage over smaller firms in this regard, and there is nothing that can be done about it. Or at least nothing that would be wholly adequate. (Were I suddenly magically in charge of everything, I would try to find ways to give smaller firms a break all the same. I'm just not sure how I would go about it.) If you try to deal with it simply by exempting smaller firms from regulations, you will basically change the form of the problem but not make it go away, or even diminish it.
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"Article asserts that big companies don't create jobs, small ones do. Can't agree. If the author had said: growing companies create jobs, static ones don't — that would be more likely." (Emphasis added.)
To some degree you're both right. Tim is right that, empirically, most new jobs tend to be created by smaller firms. But you are right as well in pointing out that it is not so much all small firms that create jobs as it is the ones that succeed and grow. Small firms create jobs — in part — not simply by virtue of by being small, but by growing and ceasing to be small!
(In fairness, others create jobs not by growing, but simply by coming into existence in the first place. They end up being significant as a source of employment collectively, despite their failure to grow (very much) individually, because they are so numerous! And because new ones are being created all the time.)
But insofar as having small firms succeed, grow, and thereby cease to be small is a key to job creation (one of the major sources of new jobs), it will not behoove you to penalize firms for growing by placing new, additional regulatory burdens upon them as they grow, conditional upon their employing additional workers. To do so, again, is in effect to tax job creation. And if you tax something, you will always get less of it.
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[1] The terminology is confusing and somewhat ambiguous in the American context. Americans (and especially lawyers) routinely distinguish between "statutes" and "regulations", the latter being rules of administration imposed in the implementation of statutes by regulatory agencies. However, many statutes are themselves clearly regulatory in nature, and therefore count as "regulations" or "regulation" in an economic sense.
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[2] In the United States, the Business Roundtable — a guild/clique/club of fat-cat CEOs of very large publicly traded corporations — is notorious for this sort of thing. It is the polar opposite of the NFIB, the National Federation of Independent Business. I do not know whether the U.S. Chamber of Commerce is still on the side of the angels (and the NFIB) today — I have heard that it may no longer be, and has been turned into a shill for large corporate donors — but it certainly used to be on the side of good and liberty and economic vibrancy, rather than entrenchment of the Establishment, in decades gone by. For instance, in the 1980s and early '90s, when Richard Rahn and then Larry Hunter served as its Chief Economist.
Biting the hand that feeds IT
