The cost of doing business in Illinois is unsustainable, and overregulation is to blame.
While reasonable people understand some regulations are necessary to protect consumers and employees, they also know that too much regulation can be crippling for small businesses, as it imposes significant costs that can be difficult to absorb.
This is the case in Illinois, where harmful state regulations are stacking the deck against small businesses like my Cleaning Authority franchise.
Between minimum wage increases, tax increases, surging workers compensation insurance and just inflation, the cost of doing business has reached an unsustainable level. While I’m sure the big multi-national conglomerates in Chicago can handle these added expenses, those of us on Main Street simply can’t. Small businesses have less room to negotiate on price and tight margins as is, so absorbing even one additional massive expense can be bankrupting.
Raising the minimum wage $1 per hour on its own raises my overall payroll costs tens of thousands of dollars a year without any increase in productivity. It’s just added costs.
But when you add in the multiplier effect, the costs surge exponentially. For example: Workers compensation rates are based on payroll costs. So when the minimum wage increases my payroll, it also increases my workers comp costs despite no additional risk to the insurance company.
Unemployment insurance costs are also based on payroll costs. When you increase the minimum wage, my payroll costs increase and I also pay more in unemployment insurance costs even if I have no new claims.
Liability insurance rates are also based on payroll costs. When the minimum wage increases, I pay more for liability insurance for my employees despite no gains in productivity or increase in risk.
Social Security costs are based on payroll costs. When the minimum wage increases my payroll costs, I pay more for the employer contribution to Social Security.
So, the $1-per-hour increase in the minimum wage actually costs me $1.25 per hour more per employee that I have to assume or pass along to my customers.
You can cut only so many corners. These cuts often come in the form of reduced hours for employees, which can lead to lower-quality service for customers. In some cases, businesses are forced to lay off staff altogether. This is not only bad for the employees but also for the economy as a whole.
When small businesses fail, it takes a toll on local communities.
In addition to imposing direct costs on businesses, state regulations can stifle innovation and hinder job growth. Burdensome regulations make it more difficult for new companies to get off the ground, and these regulations often favor established, larger companies that have the resources to navigate the red tape. This protects incumbent companies from competition and keeps prices artificially high. It also means fewer new jobs are created as businesses struggle to comply with costly regulations.
Last I checked, lawmakers campaigned on creating jobs, not killing them.
The time has come for Illinois lawmakers to take a hard look at the state’s regulatory landscape and make reforms. Our state’s small businesses cannot continue to shoulder the burdens imposed by harmful state regulations. We need relief, and we need it now. Otherwise, we’ll continue to see stagnant job growth and an exodus of businesses from our state.
• David Robak is the former village president of Prairie Grove and owner of The Cleaning Authority franchise in Cary.