The Kauffman Foundation for Entrepreneurship’s newest report on business creation rates across the United States offers some intriguing insights for policymakers.
According to Robert Litan, the foundation’s vice president of research and policy, “The Great Recession has pushed many individuals into business ownership due to high unemployment rates.” “However, economic uncertainty likely has made them more cautious, and they prefer to start sole proprietorships rather than more costly employer firms. This ‘jobless entrepreneurship’ trend negatively effects job creation and the larger economic recovery.”
No doubt, regulatory barriers and confiscatory rates of taxation are causing start-ups to make the same kind of cost-saving hiring decisions as larger, more established firms. Across nearly every industry these days companies are hiring people to independent contracts rather than salaries, converting many ‘company men’ into standalone consultants.
While becoming an accidental entrepreneur may not be the first career choice of many people – and according to the Kauffman study the college educated cohort saw the steepest decline in their willingness to start their own business – the movement of millions of people into the ranks of the self-employed could have huge consequences for policymakers.
For starters, this army of new business owners is much more likely to demand rollbacks of costly regulations and profit-killing tax rates on corporations. Your perspective changes when you go from receiving a paycheck to making a payroll.
Remember, the people that lose a job and start a business are the people whom the government should want to help the most. They aren’t looking for a hand-out or even a hand-up, just space to make a contribution that others in the free market will reward.
This constituency is a natural growth area for the conservative movement.
The best part about the Kauffman report is that entrepreneurial activity can be found in important electoral pockets. Consider:
- Entrepreneurial growth was highest among 45- to 54-year-olds, rising from 0.35 percent in 2010 to 0.37 in 2011
- The top five highest entrepreneurial rates among the fifty states were:
(1) Arizona with 520 per 100,000 adults creating businesses each month during 2011;
(2) Texas with 440 per 100,000 adults;
(3) California with 440 per 100,000 adults;
(4) Colorado with 420 per 100,000 adults; and
(5) Alaska with 410 businesses started per 100,000 adults
The key to our economic recovery rests on policymakers understanding that Americans want to work. I submit that any politician willing to make the necessary changes to tax and regulatory rules so that start-up owners can become employers as well as entrepreneurs will find a loyal constituency, and one well worth fighting for.