Hey, at least we beat the crap out of Malta.
In the World Bank's annual report on the ease of doing business, the United States ranks eighth out of 190 countries. But it was all the way down at No. 51 on the ease of starting a business, a ranking that weighs factors like procedures, time, and costs. That's a drop of six places from last year, the country's biggest decline in any category.
Comparable economies including Canada, Hong Kong, and the United Kingdom fared much better. Among benchmark nations, only Germany did worse.
Startup rates have, in fact, been rising in the U.S. for two years, with roughly 550,000 launches per month in 2015, according to the Kauffman Foundation. (Kauffman expects similar findings for 2016.) But that doesn't mean we make it easy.
The World Bank report measures elements related to regulations, licensing, and taxes, which--along with access to capital--are the most oft-cited entrepreneurial bugbears. The Affordable Care Act has emerged as the great honking bull's-eye of critics' dartboards. However, just a small percentage of U.S. companies are large enough to fall under its purview, so that's not the main problem. And some companies have capped their work forces at 49 to sidestep the requirement to offer employee health coverage. But that's a growth issue, not a startup issue.
Minimum wage, paid sick leave, and other regulations are a broader concern. (Company owners who haven't yet considered the implications of the federal overtime rule that goes into effect this December: tick, tick, tick....) But it's less any individual regulation than the accretion of federal, state, and local requirements--some of them contradictory--that makes entrepreneurship in the U.S. so daunting. According to a recent study by Babson College, company owners spend, on average, four hours a week dealing with government compliance.
The mere act of registering a business, which should be simple, often isn't. In bad times the relevant state or municipal offices may be on short hours or even furlough days. (When you're starting a business while holding down another job, free time to visit city hall may be nonexistent.) Just figuring out whether an area is zoned for a particular use can be a hassle. Fee calculations are typically dispersed, so the total cost of ownership is elusive. What, no one told you about that grease trap permit? Opening day postponed...
Keep in mind that this is a ranking. America's decline is also a function of other nations' rise. In other words, we may not be getting worse so much as other countries are getting better, faster. Interest in and facilitation of entrepreneurship has been expanding internationally for years, as documented by Babson's Global Entrepreneurship Monitor and other sources. Countries putting in functional regulatory and legal infrastructures for the first time can operate without the decades-old albatross of existing regulations weighing down the United States. That potentially makes them more competitive.
The World Bank report includes a table listing countries that, in the past year, reduced regulatory complexity or strengthened legal institutions in more than 60 areas. Many of those improvements would benefit startups. So congratulations to Egypt and Niger for merging startup processes into one-stop-shops; to San Marino for allowing companies to benefit from a 50 percent corporate income tax reduction for their first six years of operation; and to Brazil for implementing an online portal for business licenses.
From the chart of significant improvements, the United States is noticeably absent.