What can we expect for small biz?

Marketplace Staff Nov 13, 2009

What can we expect for small biz?

Marketplace Staff Nov 13, 2009


Steve Chiotakis: So, it’s good news for the economy that the first-time jobless claims number fell to its lowest level this year. But small businesses — those with fewer than 20 workers — are still feeling a big pinch. Forget about hiring; a good number of them are still cutting at a higher rate than even their big business brethren. Former Labor Secretary Robert Reich is with us to talk about the plight of the small business and whether there’s any help in the offing. Good morning, Bob.

Robert Reich: Good morning, Steve.

Chiotakis: Now why are small businesses still cutting so many jobs?

Reich: First of all, they’re sales are still very weak. After all, consumers don’t have much money and they’re scared of losing their jobs. Most small businesses aren’t big exporters, in addition, so they’re not benefiting from recoveries abroad. And in addition, many are finding it difficult to get loans. They have little or no collateral. And the smaller, regional banks they dealing with are carrying a lot of bad mortgage debts and are reluctant to lend.

Chiotakis: So will health-care reform help them?

Reich: It’s going to help those who already provide their workers with health insurance. These costs have been skyrocketing for small businesses faster than they have for large businesses because the big businesses have more bargaining clout with providers and insurance companies. And the so-called insurance exchanges that are now built into the House and Senate bills would let small businesses pool their bargaining power to get better deals. And in addition, Steve, the House bill would pay up to half the cost of premiums, depending on workers’ average wages and how small the business is. And the Senate bill gives small businesses tax credits, up to $1,000 per employee. So there are some real bennies in these bills for small businesses.

Chiotakis: But I’ve got to ask you, Bob, what about the small businesses that don’t now give their workers health insurance? I mean, wouldn’t they be required to do that?

Reich: Well they would under the House bill, or they’d have to pay a penalty. But that bill exempts small businesses with payrolls under a half-a-million dollars a year, which would mean, essentially, that most of your mom-and-pop operations would not have to worry about a thing. They would not be required to provide health insurance.

Chiotakis: And, of course, many small businesses say that a recession is the worst time to impose any new costs, right?

Reich: Yeah, they are right about that. But none of the health-care bills will kick into 2013. And I’ll tell you, Steve, if we’re not out this recession four years from now, small businesses are not going to be the only ones complaining.

Chiotakis: You’re right about that. Former Labor Secretary Robert Reich, and current professor of public policy at the University of California. Bob, thanks.

Reich: Thanks, Steve.

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