Hispanic/Latino Owned Businesses want Lower Taxes, Blacks want more Loans

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This is the second of a two-part article that examines how policies proposed by the presidential candidates are likely to affect small business hiring. The results are based on a national survey of 631 small-business owners. The survey responses should be especially important to the Republican candidates as they make their final pitch for votes in the Iowa Caucus on Tuesday. They should also be relevant to President Barack Obama’s campaign team, which has a presence in Iowa even though he is running unopposed.

In the first article, Julie summarized the survey responses and found that the two policies that would have the lowest positive effect on small business hiring are as follows: 1. Reducing the minimum wage;   2. Doing nothing – i.e., if the government simply did nothing and relied exclusively on market forces. Even though many people believe that lowering the minimum wage and getting the government out of the economy would encourage small businesses to hiring, our survey results indicated that small business owners do not feel that way.

The responses indicated that if the minimum wage were reduced, only 7.6% of nonminority business owners and 13.5% of minority business owners would definitely increase hiring. Among men business owners, the response was 11.9%; it was 9.3% among women business owners; 10.1% among white business owners; 11.9% among black business; and 8.8% of Hispanic/Latino business owners. Of all the policy related questions we ask of CEOs, a smaller percentage indicated that lowering the minimum wage would lead them to hire more workers than for any other policy.

Secondly, small business owners are also looking for the government to take some type of action to improve the economy. For example, they indicated that if the government does nothing and simply leaves the economy to market forces, 17.8% of minority business owners and 27.0% of nonminority business owners would “reduce” their workforce as a result. The same response was received from business owners who were male, female, black, white or Hispanic/Latino. Each of the various groups indicated that if the government did nothing, they would reduce their workforce.

In this article, we identify the two policies that business leaders indicated would have the largest positive effect on small business hiring. They are as follows: 1. reducing taxes on businesses and corporations; 2. making small-business loans easier to get. The survey results found that if the government reduced the tax rate on businesses and corporations, 36% of businesses owned by non-minorities and 46% of those owned by minorities would definitely increase hiring. In addition, 43% of businesses owned by men and 30% of those owned by women would increase hiring. Among race and ethnic groups, Hispanic/Latino business owners had the strongest positive response to reducing taxes. Specifically, 55% said that they would definitely increase hiring if taxes were reduced, while this was true for 42% of blacks and 37% of whites.

The survey also found that if small-business loans were easier to get, a significant percentage of small businesses would definitely increase hiring, and it would have the largest positive effect on businesses owned by blacks. The percentages of firms that would definitely increase hiring were as follows: 24% of non-minority-owned firms, 47% of minority-owned firms, 38% of firms owned by men, and 34% of firms owned by women. The results differed across race and ethnic groups. In particular, while 26% of whites said that they would definitely increase hiring, 50% of blacks and 44% of Hispanics/Latinos said the same thing.

In summary, we found that if the goal is to increase small business hiring, reducing taxes and making small-business loans easier to get our the most effective ways to achieve it. On the other hand, reducing the minimum wage would have very little effect on small business hiring, and if the government did nothing, businesses would cut back on hiring. Hopefully these results, which are based on a national scientific survey, provide food for thought to the various political campaigns as they position themselves in the presidential election.

 

 

Last modified: June 20, 2017

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