Small businesses are the heart of the United States economy and that holds true for Louisiana, too. Although large businesses in the oil and gas industry play a prominent role in Louisiana, it is small businesses that make up the majority of economic activity in our great state.
It can be a challenge to measure the confidence of small businesses in the economy or their local governments. However, Thumbtack.com has created a monthly survey that over 10,000 small businesses participate in—with “small businesses” defined as businesses with five or fewer employees.
According to the U.S. Economic Census, companies of this size make up more than ninety-percent of “small businesses” in the United States. Thumbtack’s survey breaks down the responses into state-level results as well, with Louisiana having over 100 responses.
In this survey, Louisiana’s small businesses felt less optimistic in June than in May, but the real findings are the national and regional results, as well as Louisiana’s results relative to those. Nationally, small businesses have quite a negative outlook on their expectations for the future. A variety of factors could be affecting this, including domestic matters like the Affordable Care Act and other issues that would affect labor, as well as international issues like the turmoil in Greece and the Trans Pacific Partnership.
However, what stands out in the results is that the small businesses in the South remain optimistic about their prospects.Louisiana outpaces even the South’s optimism in Thumbtack’s survey. Thumbtack analyzed the results for the state and found that it was “particularly optimistic about future hiring, ranking fourth nationally in this critical metric”. In the interest of clarifying the results—especially concerning Louisiana, we contacted Scott Burns, a PhD Fellow at the Mercatus Center at George Mason University. After reviewing the results, Burns said:
“The results in Louisiana and across the South suggest that firms aren’t as concerned about international turmoil or domestic factors. In many cases firms in these areas might feel insulated from the uncertainty clouding the international environment. Perhaps they are more optimistic about the future growth potential of major regional-specific industries like oil and natural gas.”
Burns goes on to explain that state-level policies could be playing a role as well:
“The results might also reflect a more stable and business-friendly policy environment at the state level. In any case, expectations matter, and the more optimistic outlook many southern firms have certainly bodes well for future economic growth in those regions.”
Burns brings out in his analysis what many small businessmen intuit, which is that a business-friendly policy environment in Louisiana is key to economic growth. This is almost certainly affecting the degree of confidence that small businesses in Louisiana have in their prospects for the future.
It is important that we maintain a firm commitment to small businesses and to the economic principles that instill confidence in the entrepreneurs who run them. This means not raising taxes on small businesses that can’t afford it. It also means not filling holes in the budget on the backs of small business owners who make up the spine of our economy. Tax credits and other incentives can be useful, but simply avoiding unnecessary burdens goes a long way to helping small businesses prosper.
Louisiana is just now being recognized as a leading state for businesses of all sizes, with a number of policies being implemented in recent years that encourage entrepreneurs and business owners to open offices, locations, franchises, or companies here. What this survey shows is that local, state, and national events can have a profound affect on how business owners view the economic future and whether they choose to expand or contract, hire or fire, offer benefits or cut back on salaries. With that in mind, Louisiana lawmakers and citizens should oppose unreasonable EPA regulations, costly and burdensome health care laws, or tax hikes that could damper the confidence of small business owners seeking opportunity in Louisiana.