As the candidates for the Republican presidential nomination head into the Iowa straw poll, and are joined by President Barack Obama, the results the Gazelle Index national survey should be of great interest. It should also be of interest to the readers of our blog and especially to the political strategists who are assisting the various political camps. This is part one of a two-part article. The articles focus on how policies that are being advocated by the Presidential candidates would influence small business hiring. To determine this, in our 4th Qt. 2011 Gazelle Index survey, we posed various questions to small business leaders. In response to the questions, we asked them to indicate whether the policies would cause them to “definitely increase hiring”; “maybe increase hiring”; “have no effect on hiring”; “cause hiring to decrease “.
In this article (which is part one) we identify the policies that would have the least positive influence on small business hiring. In a follow-up article to be posted tomorrow, we identify policies that would have the most positive impact on hiring. The survey was issued to 631 randomly selected CEOs small businesses across the nation, each had 10 to 100 employees. Survey participants included leaders of businesses owned by minorities (i.e. African-American/blacks and Hispanics/Latinos); non-minorities (i.e. whites), as well as women and men. The survey was designed so that the responses of each group would have not greater than the 5% margin of error.
This first article identifies what policies the candidates should not advocate, if they expect that action to increase small business hiring!
To our surprise, most policies would affect black, white, Hispanic/Latino, women and men business owners differently. As a result, the candidates would be mistaken if they assume their policies would be equally effective for all groups– except in two areas. That is, based on the survey responses, there were two policies that would have a uniform effect on hiring across minority and gender groups. Ironically, those same two policies are the ones that would likely have the smallest positive effect on hiring. Here is what small business owners said.
Surprise, surprise! Reducing the minimum wage would have the smallest positive response on small business hiring among all policies. Only 7.6% of nonminority business owners and 13.5% of minority business owners indicated that reducing the minimum wage would cause them to definitely increase hiring. Among men business owners, the response was 11.9% and it was 9.3% among women business owners. The responses did not differ much across race and ethnic groups. Specifically, 10.1% of white business owners indicated that lowering the minimum wage would definitely cause them to increase hiring, while this was true for 11.9% of black business owners and 8.8% of Hispanic/Latino business owners. Of all the policy options we posed to CEOs, their response indicated that lowering the minimum wage would have the smallest positive effect on hiring.
This should be food for thought for the candidates because typically minimum wages is one of the most hotly debated topics among Democratic, Republican and Independent Party candidates for office. Those who favor lowering the minimum wage assume that doing so will induce small businesses to hire more workers, thereby lowering the high level of unemployment. They argue lower minimum wages would be especially effective in central cities where large sectors of the workforce are unemployed and skill levels are relatively lower. Those who oppose lowering the minimum wage usually do so because they are concerned it would reduce the living standard of persons who are already among the “working poor”. The results of our nationality scientific survey indicate that a lower minimum wage would have almost no effect on small business hiring.
A second area where there was a uniform response across the groups was whether the government should take any action at all, or simply “do nothing” and leave market forces to resolve the unemployment issue. Responses to this question indicated that “doing nothing” would not encourage business hiring; in fact the effect on hiring of “doing nothing” was the second smallest behind lowering the minimum wage.
Specifically, 13.3% of nonminority business owners and 10.7% of minority business owners indicated that if the government took no action and left the economy to market forces it would definitely induce them to increase hiring. Among men business owners, the response was 12.3% and it was 11.8% among women business owners. The responses were as low across race and ethnic groups; 12.6 of white business owners indicated that doing nothing would definitely cause them to increase hiring, while this was true for 8.9% of black business owners and 14.8% of Hispanic/Latino business owners.
In contrast, a higher percentage among each group indicated that doing nothing would more likely cause them to decrease hiring rather than increase hiring. For example, 17.8% of minority business owners and 27.0% of nonminority business owners said that if the government did nothing, they would likely end up decreasing hiring. Among women business owners the percentage was 21.4%, it was 18.1% among whites, 37.1% among blacks, and 20.5% among Hispanics.
The lesson to be learned is as follows: lowering the minimum wage is a hotly debated political topic but in the final analysis small business owners indicated that it would have little or no influence on their willingness to hire workers. On the other hand, small business owners are looking for the government to take some type of positive action because a higher percentage among each group indicated that if the government did nothing they would more likely decrease rather than increase hiring. On tomorrow, we will focus on policies that will have the greatest impact on small business hiring.