Right-to-Work, Prevailing Wage Repeal Expected to Improve Small Business Optimism in WV

Date: February 09, 2016

The National Federation of Independent Business’ widely-watched Index of Small Business Optimism fell 1.3 points to 93.9 in January on concerns over business conditions in general and sluggish sales in particular.

“These expectations are important determinates of decisions to hire, to expand business operations and to order new inventory—all drivers of the economy,” said William Dunkelberg, chief economist of NFIB, the nation’s leading small-business association. Download the full report at www.NFIB.com/optimism.

State-specific data isn’t available, but Gil White, NFIB’s state director for West Virginia, predicts the outlook here will improve once the Legislature overrides the governor’s promised vetoes of right-to-work and prevailing wage legislation.

“This legislation is a game changer,” White said.

“Corporations look at whether a state is a right-to-work state when they’re deciding where to move or expand,” he said. “The more new jobs we get, the more opportunities there will be for small businesses.”

Likewise, he said, repealing the state’s prevailing wage law would help assure fair and open competition on publicly funded construction projects. Currently, the state can mandate wages that are significantly above what local businesses are paying.

“By repealing this antiquated law, we’ll not only save taxpayers money, but we’ll end a practice that often shuts out small and minority contractors from participating in the bidding process for local projects,” White said. NFIB/West Virginia is the state’s leading small-business association with 2,000 dues-paying members representing a cross section of the state’s economy.

National trends

The overall Index dropped 1.3 points in January and now stands at 93.9, which is well below the 42-year average of 98, Dunkelberg said.

Last month the sharp increase of owners expecting their real sales to improve did not materialize and this month it dropped by 4 points to 3 percent. Owners expecting better business conditions in the next six months dropped an additional 6 points after plunging 7 points last month, winding up at a dismal net negative 21 percent. Actual spending and hiring numbers held up pretty well and even though job creation fell, it maintained a respectable level for this recovery.

More owners reported cutting average prices than raising them. Reports of higher compensation and hard-to-fill jobs rose to expansion high levels. Profit trends worsened slightly and more owners reported sales trending down than trending up. Among small business owners who characterized the current environment as a bad time to expand; weak sales, poor economy and the political climate were cited most as the reason. 

“The labor market continues to show strength that is driven by the core growth in the economy that results from a growing population. But uncertainty continues to cloud the future,” Dunkelberg continued.

“The current administration offers little promise that serious economic problems will be dealt with while the avalanche of regulations for small businesses continues.

Overall, it is unlikely that anything will occur to raise the spirits of small business owners and rekindle their fire that is needed to spur economic growth.”

Dunkelberg also noted that a consumer sentiment survey by the University of Michigan fell to one of the lowest readings in the last 12 months.

NFIB’s monthly Small Business Economic Trends survey is based on a monthly survey of small businesses. The survey was conducted in January and reflects the response of 1438 small businesses.

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