2. Table V: “Most important challenges facing your company.”
Challenges Rank 1 Rank 2 Rank 3 Rank 4 Rank 5 Rank 6 Rank 7 Rank 8
Increased Competition 40 28 27 20 20 18 14 7
Inadequate Infrastructure 5 7 15 12 19 39 29 24
Regulation 61 27 33 16 12 13 12 2
Labor Costs 16 31 40 29 28 14 3 5
Insurance/Other Costs 38 53 32 21 16 10 7 0
Workforce Issues 15 23 16 26 27 20 19 13
Access to Capital 35 17 12 15 15 18 40 11
Other 11 6 15 10 6 5 5 72
business owners’ attitudes toward were government regulation; the issue is less with the regula-
regulations, their perceptions business costs other than labor; tions themselves than with the
of the degree of impact on their increased competition; and labor difficulty of compliance. It is as if
businesses, and their view of the costs. the survey respondents were say-
regulators who enforce them. The comparisons among busi- ing that the rules are inflexible,
An online survey based nesses in the Twin Cities metro incomprehensible, ineffective,
on one developed for the Irish area (Metro), regional popula- and inconsistent, but we comply
equivalent of the Department of tion centers (non-Metro), and with them. Given the stress in the
Commerce was distributed to a rural businesses (rural) revealed literature on the negative impact
random sample of 10,000 busi- that, for major issues and im- of regulations on small business-
ness corporations in Minnesota. pacts, there were few differences es, it is interesting that it was the
The initial response rate was 199 based on location in the state. larger firms that were more likely
respondents, or 2%. A second While regulation was given as the to report perceiving compliance
wave of survey responses was greatest challenge everywhere in as burdensome. Respondents
generated by inviting participa- the state, competition came in a also reported that the regulations
tion from subscribers to e-news- close second in both the Metro that have the most significant
letters from Small Business De- and non-Metro cities. Labor and impact on one’s own business
velopment Centers and Enterprise other costs were a close second do not have a particularly heavy
Minnesota, bringing in additional in rural areas. The pattern of re- compliance burden. Instead, they
118 responses. A supplemental sponses indicates that businesses perceive the most burdensome
survey, targeted specifically to in the non-Metro cities are much regulations as those that have an
the Metro/non-Metro/rural dif- more concerned about regula- effect on business in general.
ferences, was sent by e-mail to a tions than those in the Twin Cities
sample of 1,500 businesses (500 metro area or in rural areas. Busi- Discussion & Implications
from each location) listed by area nesses in rural areas, particularly, This study set out to explore
chambers of commerce. This were less concerned about state three questions regarding busi-
survey returned 112 responses and local regulations than the ness owners’ attitudes toward
(36 from Metro, 38 from Greater cost of doing business. regulation—the impact of regu-
Minnesota cities, 38 from rural The top priority for regula- latory compliance on business;
counties). tory change was in the area of the relative impact of regulatory
The survey found that the top income and corporate taxation. compliance on a business in rela-
four challenges for businesses Except for taxes, it appears that tion to its competitors; and the
2 Center for Rural Pollicy & Development
3. Table VII: Impact of regulation on business.
Areas of Regulation Major Impact Moderate Impact Little Impact No Impact
State/Local Health and Safety Regs 25.25 31.19 25.74 17.82
State/Local Environmental Regs 23.65 29.06 26.11 21.18
State/Local Land Use Regulations 22.66 20.20 28.08 29.06
Reporting MN Income/Corporate Tax 20.10 39.22 30.39 10.29
State/Local Business Licensing 19.70 31.53 36.45 12.32
Other State Employment Law 15.27 42.86 31.53 10.35
State/Local Corporate Regulations 14.22 32.35 40.69 12.75
Reporting Industry Specific Taxes 10.15 22.84 34.01 33.00
Return of Statistical Data 4.50 21.50 41.50 32.50
Table VIII: Regulations that have most significant impact on your business.
Most Significant Percent Number
Reporting MN Income/Corporate Tax 33.33% 65
State/Local Business Licensing 13.85% 27
State/Local Land Use Regulations 12.82% 25
State/Local Health and Safety Regs 11.80% 23
State/Local Environmental Regs 11.28% 22
Other State Employment Law 12.82% 15
State/Local Corporate Regs 5.13% 10
Reporting Industry Specific Taxes 3.08% 6
Return of Statistical Data 1.03% 2
differential impact of regulatory 3. Increased competition. corporate income taxes; when
compliance on various categories 4. Labor costs. they were asked about the impact
of businesses, including rural on business in general, they were
businesses. The findings also indicated most concerned about safety, en-
that it was difficult for respon- vironmental, and land use regula-
Impact of Regulatory Compliance dents to separate the impacts tions. In fact, the top five rank-
on Business of state and local agencies and ings show an inverse correlation
Overall, respondents ranked regulations from those of federal between whether the question is
regulations as the greatest chal- agencies and regulations. posed about business in general
lenge (Table V). (Table numbering Examining the issue more or one’s own business. The issues
has been preserved from the full closely, questions about the most important to a business
report.) The survey found that the impact of regulations on busi- owner’s own business were least
top four challenges for businesses ness in general vs. the impact on important to business in general,
were: their own businesses exposes a and vice versa. This suggests that
discrepancy (Tables VII, VIII and at least part of the concern being
1. Government regulations. IX). When considering the impact expressed is a matter of percep-
2. Business costs other than on their own businesses, respon- tion rather than direct experience.
labor. dents were most concerned about
Perceptions and Regulations: Impact of State and Local Regulations 3
4. Table IX: Reasons for stating regulations have significant impact on your business.
Statement Strongly Agree Agree Neither Disagree Strongly
Disagree
The regulations are flexible <.01% 10% 25% 39% 26%
The regulations are easy to understand 2% 17% 19% 39% 23%
The regulations achieve their objectives <.01% 14% 31% 37% 18%
The regulations are consistent <.01% 13% 33% 39% 15%
The regulations are appropriately enforced 3% 20% 34% 27% 16%
Despite the number, it is still possible to 2% 37% 36% 15% 10%
comply
The top priority for regulatory compliance was perceived as the the increasing complexity of exist-
change was in the area of income most burdensome; in non-Metro ing regulations.
and corporate taxation. Unlike cities, it was compliance with Some pointed to duplication
the other issues, the problem environmental regulations; in the of authority, such as the Depart-
here seems to be with regulations Metro area, it was employment ment of Agriculture and EPA,
themselves rather than how they regulations (Table XLIII). state and federal employment
are enforced. The open-ended There is some tension among regulations, the MPCA and the
responses referred to the sheer the types of firms between consis- DNR, the Minnesota Depart-
number of taxes, to the role of tency of enforcement and flex- ment of Revenue and Minnesota
some businesses in collecting tax- ibility in enforcement. For some, Unemployment, and multiple
es from customers for the state, the issue is that the regulators inspectors at the same worksite,
and to the amount that was taken are too inflexible; for others, it each with his or her own man-
in taxes (especially compared to is that they are inconsistent (one dates that could stop construc-
neighboring states). person’s “inconsistency” could be tion.
Except for taxes, it appears another’s “flexibility”). Some of Although respondents re-
that the issue is less with the the open-ended responses stated ported that compliance is more at
regulations themselves than with that there were too many regula- issue than the nature of the regu-
the difficulty of compliance. tions from too many sources to lation, compliance is reported as
This finding coincides with the keep them all straight. Others a burden less frequently than the
findings of the state Legislative took the position that the regula- overall “impact” of regulations.
Coordinating Commission study tors were not there to help the Also, given the stress in the lit-
(Dhakal, 2011). It appears that businesses, but to punish them, erature on the negative impact of
survey respondents consider the and that they came with demands regulations on small businesses,
rules inflexible, incomprehensi- but no answers or authority to it is interesting that it was the
ble, ineffective, and inconsistent, make final decisions about how larger firms that were more likely
but they comply with them any- one was to comply with those to report perceiving compliance
way. While taxes were perceived demands. as burdensome. Respondents
as having the greatest impact, the One finding of particular reported that the regulations that
burden of complying with tax interest, though, was when have the most significant impact
regulations was not considered to respondents reported that their on one’s own business do not
be as heavy as other regulations. cost of compliance is increasing have a particularly heavy com-
In rural areas, health and safety because of new regulations and pliance burden. Instead, they
4 Center for Rural Pollicy & Development
5. Table XLIII: Level of burden by location (% reporting burden to be heavy).
Other Em- Environ-
Income/ Land Use Business Health & ployment mental Corporate Statistical
Corp Tax Regs Licensing Safety Law Regs Regs Data Reporting
Metro 0% 3% 17% 17% 20% 9% 9% 3% 6%
Non-Metro 8% 16% 14% 11% 11% 27% 8% 15% 11%
Rural 6% 11% 6% 20% 14% 17% 6% 14% 11%
perceive the most burdensome perceived regulations as neutral), compact enough for more intense
regulations as those that have an on the open-ended questions enforcement than in rural areas,
effect on business in general. many asked for tighter oversight while enforcement in the Metro
of banks and real-estate lend- area is focused more on a num-
Relative impact of regulatory ers, limitations on bank fees and ber of complex cases. Or perhaps
compliance on a business in rela- Internet commerce, limitation businesses in non-Metro cities
tion to its competitors on utility rate increases, limita- expect a more “personal” style
The dominant response tions on lobbying, and increased of enforcement like rural areas,
concerning regulations and their support for renewable energy. rather than a more bureaucratic
effect on competition was that Although these comments were style common in very large met-
regulations had no significant offered by only a few respondents ropolitan areas. It also suggests
effect on the business environ- and are not necessarily represen- that future research look into the
ment in general. When asked tative of the group, they do sug- conditions that generate different
about the competitive impact gest areas in which regulations business expectations in different
on their business specifically, on might be perceived as having a areas in regard to regulation and
balance respondents reported particularly noticeable effect on what regulatory agencies might
that regulations had little effect relative competitiveness. learn from those expectations.
on the intensity of competition, The Metro/non-Metro/rural
although regulations did limit the Differential impact of regulatory comparisons revealed that, for
entry of new competitors into the compliance on various categories major issues and impacts, there
market. In terms of competition of business were few differences based on
with firms outside Minnesota, The pattern of responses location. State and local regu-
perceptions were about evenly indicates that businesses in the lations were perceived as the
split on whether Minnesota has non-Metro cities are much more greatest challenge regardless of
more regulations or about the concerned about regulations location in the state, although
same amount. than those in the Metro area or in businesses in non-Metro cities
And yet, while the respon- rural areas. This finding suggests responded more strongly (Table
dents clearly expressed a de- that further research is needed to XXXVIII). Within the category of
sire for fewer and less intrusive explore whether the difference is regulations, however, regional
regulations, and while few of due to differences in enforcement differences begin to emerge.
them reported perceived benefits or differences in expectations. Businesses in all three areas
from regulation (at best, they Perhaps non-Metro cities are were most concerned with
Perceptions and Regulations: Impact of State and Local Regulations 5
6. Table XXXVIII: Top-Ranked Challenge by Location (%)
Competition Infrastructure Regulation Labor Cost Other Cost Workforce Capital Other
Metro 19% 3% 22% 11% 19% 8% 17% 0%
Non-Metro 32% 3% 34% 8% 5% 11% 5% 3%
Rural 13% 0% 26% 18% 21% 8% 3% 11%
Table XL: Major Impact of Regulations on Business by Location (%)
Income/ Land Use Business Health & Other Environ- Corporate Statistical Reporting
Corp Tax Regs Licensing Safety Employment mental Regs Data
Law Regs
Metro 32% 10% 16% 3% 23% 6% 10% 0% 0%
Non-Metro 33% 14% 14% 6% 0% 17% 14% 0% 3%
Rural 26% 9% 12% 15% 15% 9% 3% 6% 6%
income/corporate taxes (Table ing field, but not so much as to them with other agencies. This is
XL). Burden of compliance also stifle innovation and entrepre- great for businesses, where time
varied (Table XLIII). Businesses in neurship. Finding this balance is money.
the non-Metro cities were most will require effort at the local as • Go beyond “customer ser-
concerned about complying with well as the state level—local gov- vice” training for regulators.
environmental regulations, while ernment regulations like land use Business owners reported that
businesses in rural areas reported controls and business licensing their biggest issue with regula-
the greatest burden from health were mentioned as much as state tors was that the process was too
and safety regulations. Businesses regulations like pollution control inflexible. However, nearly half
in the Metro area reported their and sales tax reporting. of business owners also reported
greatest burden from employment that regulators did not sufficiently
law. Potential next steps understand the practices in the
• Coordinate and streamline respondents’ businesses, that the
Recommendations the tangle of regulations already regulators’ decisions were not
The findings from this survey in place. predictable, that the process for
appear to confirm the findings First of all, we would recommend appeals was not clear, and it was
from the report to the Minnesota that policy makers, whether at the not clear who was responsible for
Legislative Coordinating Com- state or local level, consider the making decisions.
mission cited at the beginning of impact any new regulation will While some agencies may be
this report (Dhakal, 2011): The have in combination with already practicing customer service train-
primary issue expressed by busi- existing regulations. One of the ing for their regulators, the issues
ness owners is in complying with most telling findings in this study stated above go beyond learning
regulations, rather than the num- was that business owners say the standard customer service prac-
ber or character of the regulations cost of compliance is increasing tices and need to be addressed
themselves. because of the increasing number through agency policy. Agencies
The trick, therefore, is to find and complexity of regulations. could consider examining these
a balance between having and Some state agencies are already issues of inconsistency that are
enforcing enough regulation to working to streamline their regu- causing frustration for business
keep everyone on an even play- latory processes and coordinate owners and take steps to address
6 Center for Rural Pollicy & Development
7. them if necessary, ensuring that
any new policies that result are
communicated down to those
who work directly with the pub-
lic.
• Education for “customers”
on the various regulations—in-
cluding processes—and the
benefits they provide. Education
also falls to the business owner.
Plain-English explanations of the
regulations, available through
printed materials, web sites, and
regulators, could lower the frus-
tration level for the people who
are expected to comply.
Comparing Minnesota’s
regulations with those of other
states may be less important than
doing a better job with what we
have. As Dhakal (2011) pointed
out, businesses do not necessar-
ily choose the states with fewer
regulations. They choose the
states with the best opportunities
and figure out how to deal with
the regulations.
This full report can be found online at
www.ruralmn.org.
Perceptions and Regulations: Impact of State and Local Regulations 7
