Small businesses fearing a recession

NFIB President & CEO Juanita Duggan on small business optimism still close to a 2-year low.

NFIB President: Overtime Rules Would Sock Small Business

The National Federation of Independent Business’s (NFIB) gauge of small business optimism showed improvement in April, but the firm’s leader said new regulations concerning overtime rules might put that positive feeling on ice.

Continue Reading Below

“I was talking to one of my members yesterday in Pennsylvania. He had done the math, and he told me that [the rules] are going to completely wipe out his profit,” Juanita Duggan, NFIB president and CEO told FOX Business Network’s Neil Cavuto on Tuesday.

The new rules, a final set of which are expected to be announced by the Department of Labor later this week, are the answer to a long-awaited overhaul of overtime pay regulations in the United States. In the current business environment, the nation’s employers are only required to pay overtime to an employee who works more than 40 hours in a work week and earns less than $23,660 in a single year.

However, the new rules under President Barack Obama, would expand those guidelines and allow employees making as much as $50,440 in a year to become eligible for overtime wages. The president said the expansion would benefit as many as five million workers in the first year of the new rules alone.

But critics of the president’s plan say the widened guidelines would hurt small businesses, and put more pressure on the retail sector.

More on Small Business

Duggan argued that it’s a no-win policy for America’s smaller businesses and business owners.

Continue Reading Below

“People who were previously upwardly mobile within small businesses are now going to become hourly wage earners, and they won’t be on the management track,” she said. “I think it’s going to be really bad for workers.”

She said combined with a slew of other regulations in the pipeline concerning American business, including efforts to mandate a higher minimum wage – a discussion that’s routinely discussed on the 2016 campaign trail – as well as paid leave regulations and higher health care costs, small business will bear the brunt of the pain.

“They don’t have armies of lobbyists, lawyers and compliance officers to help them with this kind of compliance…they’re very pessimistic. Our optimism index is now at very low levels. We’re looking at levels that were during the 1990s recession. Clearly small business has not shared in the recovery,” she said.

Indeed the NFIB’s small business optimism gauge rose to 93.6 in April from a reading of 92.6 in March. The number of firms with intentions to hire rose to 11% from 9%, while the number of businesses raising net compensation rose to 24% form 22%.  

Analysts at Barclays said in a note Tuesday the trend for small business optimism, despite the monthly rise, has been a lower trajectory since the start of 2015, and they attribute it largely to a divergence between selling prices and labor costs.

“Weak output prices have not prevented firms from raising worker compensation, which has given way to a dynamic that is negative for profit margins,” the analysts’ note read. 

However, they said as the headwinds subside, those businesses should find it easier to raise prices that are more in line with their costs in an effort to preserve profitability.

Duggan said, though, more regulation on American businesses won’t help their efforts to attract talent, and hold onto their profit margins. Instead, she said it will continue to sock small businesses. She pointed to policies from Republican presidential hopeful Donald Trump, who she said appears to be more pro-businesses than any other candidate remaining in the field.

“Some of the top-line things [Trump] has discussed are things that have been the NFIB’s position for years,” she said pointing to his opposition of the Affordable Care Act, one of President Obama’s hallmark pieces of legislation.

“He has said he’s not a fan of Obamacare, and NFIB was the organization that tried to overturn Obamacare in the Supreme Court. We remain opposed to it…these are not growth policies for small business,” she said. 

What do you think?

Click the button below to comment on this article.