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Illinois, Chicago treats small businesses like they’re a problem

Updated: September 25, 2013 6:08AM

Illinois is the heart of America and small businesses are the economic backbone of our state. Unfortunately, far too often Illinois treats its job creators like criminals.

In Illinois a business owner can be charged with a felony for braiding hair or applying nail polish without a license. Unlicensed delivery of letters by bicycle in Chicago’s Loop can land a messenger in jail. Chicago’s food truck operators are required to install GPS devices, the costly equivalent of electronic ankle bracelets, so that the city can track their whereabouts. The Department of Business Affairs and Consumer Protection’s Commissioner has the power to vest any Department employees or inspectors with full police powers, including the right to arrest, to enforce any business licensing provision.

These are only a few examples of how criminal penalties for business-licensing violations have proliferated in laws affecting low- and moderate-income occupations, which are typically set up as small businesses.

Everyone from Gov. Pat Quinn to Mayor Rahm Emanuel recognizes the vital contribution small businesses make to our communities, but it can be easy to underestimate how the layers of red tape can entangle entrepreneurs and make them feel unwelcome. Having these provisions on the books, regardless of how frequently they may be enforced, is a threat hanging over the heads of business owners, especially innovative new businesses with significant job-creating potential. The criminal penalties foster a presumption of guilt and a culture of intimidation in which business owners are afraid to stand up to erroneous or arbitrary applications of the law by regulators or inspectors.

Even an innocent business is vulnerable to reputational damage from an alleged violation. Nor are the criminal penalties necessarily tied to high-risk conduct — generally, any violation will suffice, no matter how insignificant or unintentional. And the laws themselves are often confusing and vague, allowing regulatory agencies broad discretion to interpret their scope.

The message sent to job creators is that they are a problem to be policed rather than a valuable resource to be celebrated. That message is particularly discouraging when Illinois’ unemployment rate is 9.2 percent, the second-highest in the nation. To put that number in perspective, Illinois’ jobless rate is more than three times higher than that of the state with the lowest unemployment rate (North Dakota at 3.0 percent). Chicago’s unemployment rate is higher still at 9.4 percent.

Excessive licensing of common occupations is at the heart of the problem. Nearly one in three U.S. workers now needs government permission to do their job compared to just one in 20 in the 1950s. Over the years, legislators have piled these licensing laws on even though the requirements are often completely unnecessary to protect the public.

Established interests — not consumers — typically lobby for licensing laws to limit competition and raise prices for consumers. Adding criminal penalties to these laws is adding fuel to the fire — permitting more aggressive targeting of unlicensed competitors and further stifling job-creation. Hardest hit are lower-income entrepreneurs who lack the financial resources and access to legal counsel to navigate these government-created barriers.

Illinois and Chicago lawmakers have the power to make our state a role model for the rest of the Midwest by clearing out obstacles to small business growth. Culling unnecessary criminal penalties from business-licensing laws would be a good start. Those laws should also be scrutinized to determine whether there are less burdensome and perhaps more effective alternatives to licensing. Building a business takes courage and determination, and now is the time to show our small businesses that they are one of Illinois’ most valued resources.

Erika Pfleger is assistant director of the Institute for Justice Clinic on Entrepreneurship at the University of Chicago Law School.

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