June 26 2013

DOL on a Mission to Crush Entrepreneurship

Carrie L. Lukas

What is the biggest casualty of government over-reach?  Most of us tend to focus on the economic costs of over-regulation—the jobs lost when government imposes huge paperwork burdens on small businesses or the higher prices in grocery stores and gas stations that flow from costly energy policies.   Those are important to be sure, especially when so many Americans are out of work or under-employed and struggling to make ends meet.

Yet there are other costs too.  It’s hard to put a price tag on outlawing kids’ lemonade stands and school bake sales, but that doesn’t mean it isn’t a significant loss.  In fact, the chipping away at the richness of civil society and diversity of life is one of the saddest outcomes of an overly burdensome, intrusive government.

I’ve written before about how the antiquated Fair Labor Standards Act makes our work-life less flexible and can create costly, job-killing burdens for business.  Yet this story in USA Today does a much better job is showing the real casualties of this law.  It isn’t just dollars lost, but the crushing of ambition, entrepreneurship and that very American belief that you can turn a good idea into a win-win for yourself and your community. 

Here’s Rhea Lana Riner’s story:

As a mother of three who has struggled to stick to a family budget, I know the frustration parents feel as they watch children grow out of brand new clothes seemingly overnight. That's why in 1997, I started a kids' clothing consignment business, a little like the ones that are everywhere now but also a little different.

What started as a small family business operating out of our home has grown to 22 states. Now, though, it might all turn out to be illegal, thanks to the bureaucratic thinking of the Department of Labor.

Riner’s business rents a large space for a few days, give parents the opportunity to sell their old kids’ stuff, and take a cut of what’s sold.  The Department of Labor objects to how Riner gives parents (both sellers and shoppers) the option to help out with the set-up of the exchange, and—rather than being paid with a wage—they have the right to shop first, when the deals and variety are best. 

The Department of Labor says that arrangement violates the Fair Labor Standards Act.  Riner explains what it would mean for her business to transition those volunteers into paid staff:  

This means paying the federal minimum wage of $7.25 per hour, filling out IRS paperwork and complying with who-knows-what other rules. And all for a pop-up business that lasts days.

Needless to say, no one is forced to help out at one of these sales.  Those who do so want to and believe that it’s worth their time to have access to the special deals. Who is the government to tell them that this is an unfair—even illegal—arrangement?

I don’t know if Riner is going to have to shut down if she is forced to comply with the complicated process of compiling with these formal government rules and procedures.  Yet I know that there is a big cost to stories like these.  It’s not just that people will be worse off, not being able to buy and sell their children’s products through these exchanges. The worst consequence is the message it sends to potential entrepreneurs:  Don’t bother; the government eventually will shut you down anyway.

Riner writes: “If we want the real world economy to thrive as much as the innovative Internet world, entrepreneurs need the same freedom to innovate.” 

That’s putting it nicely.  She could have also said that we need government to stop being such a bully and ruining what’s best about our country.

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