Viewpoint: The Future of Entrepreneurship

Martin Bailey examines legislation

Opportunity for all. Social networks are self-selecting, and some people have to work extra hard to gain entry to a region’s network of entrepreneurs. While various organizations exist to help women and people of color access entrepreneurial skills and information, these efforts may not suffice. Under-representation of any group presumably would filter out a number of potential high-growth companies.

Workforce issues

A long-time strength of the American workforce, worker mobility has declined. This trend has been attributed in part to an aging population and in part to the current difficulty people have in selling their homes. Businesses report difficulty finding employees with the right training, especially at the technician level, where straightforward vocational training could help.

Global competition

Increasing global competition for good projects, entrepreneurs and capital is a positive trend from an international perspective, but runs counter to the national goal of promoting rapid growth in U.S. industry and employment. Today, many entrepreneurs can choose among starting a business here, in their home country, or even in a third, more hospitable nation. At the same time, current U.S. immigration policy hinders entrepreneurs from coming here to launch their companies. A recent report from The Brookings- Duke Immigration Policy Roundtable concluded that “educated workers with the knowledge and skills to innovate are critical” to the United States and recommended increasing the annual number of skilled visas.

Policy Goals for Small Business

Measuring Results
More work is needed to identify key policy goals and priorities related to small business success. Critically, what would constitute “improvement” in public policy regarding small business employment, and how would we measure it? Clearly, increasing the total number of jobs created each year (by both small and large businesses, net of job destruction) would be a positive outcome, all else being equal. Another potential goal would be improving the “quality” of the jobs created, as measured by average compensation or by job creation in new industries or geographic areas where unemployment is high. Creating “good jobs” that bring generous compensation would seem to be always desirable, but this outcome could conflict with other social goals, for example, if the jobs created required skills out of the reach of groups that are traditionally difficult to employ.

Slowing job destruction could be as important as increasing the creation of new jobs, but discouraging layoffs without increasing performance would do more harm than good. The trick is to raise the quality of marginal firms so that their improved performance allows them to retain employees they would otherwise have to let go.

A final key factor in setting policy goals that would support small businesses is measuring the cost to taxpayers of the initiatives that flow from the goals. This includes the subsidy cost contained in the federal budget, as well as costs and tradeoffs in society at large.

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