Could policies that protect against some entrepreneurial risks and economic hazards encourage more people to start companies? According to the Entrepreneurship Policy Digest released in 2016 by the Ewing Marion Kauffman Foundation, a more robust safety net could do just that.
Researchers found that business ownership increased 16 percent among households that were newly eligible for food stamps. And, in France, an unemployment insurance program increased business creation by allowing entrepreneurs to insure against business failure by retaining access to their unemployment benefits. Significantly, the program did not attract less-qualified or less-talented entrepreneurs but drew entrepreneurs who outpaced their incumbent competitors in terms of hiring, productivity and wages.
The report recommends these strategies to encourage entrepreneurship:
- Reduce the opportunity cost of entrepreneurial experimentation. This can be accomplished through family-friendly policies such as subsidized child care or preschool to boost the number of female entrepreneurs, and reforming unemployment insurance to help nascent entrepreneurs mitigate the downside risks of starting businesses.
- Facilitate asset accumulation. This is an especially important issue for millennials, many of whom are encumbered by heavy student debt burdens that make it difficult to accumulate the savings needed to bootstrap a startup.
The Policy Digest also includes a review of research on health insurance and entrepreneurship.
The “Georgia Latino Entrepreneurship Study”, the first of its kind in the state will be incorporating specific questions that connect personal factors and access to a “safety net” to the ability to grow a business. Findings will be announced in March 2019. Interested in learning more? Email us here.
Other studies show that when governments provide citizens with economic security, they embolden them to take more risks. Click here to learn more.