America’s economic recovery from Covid-19 requires a new commitment to entrepreneurship. Not enough jobs will return by simply re-opening the doors, because so many US businesses have been shut down from the pandemic: at least 3.3 million by one estimate, including 41% of Black-owned businesses and 32% of Hispanic-owned ones. Many businesses will close permanently, and our nation needs new ones to take their place, as new businesses create virtually all job growth, including replacing jobs lost.
Many are surprised that America has long been in a “startup slump.” New business creation in America has fallen overall to its lowest rate in more than 40 years, despite entrepreneurship’s many benefits. New businesses are leading indicators of GDP growth. People who start businesses earn higher lifetime incomes. More businesses correlate to higher average incomes in communities. More new businesses starting correlates with lower income inequality.
To prioritize business creation and growth, our nation must create a vibrant new entrepreneurial environment. That environment must be implemented through federal, state, and local policies, because barriers to entrepreneurship exist at all three levels. It must be community-focused, because entrepreneurship thrives in local interactions among people who start and support new businesses. It must include all communities, because every community needs new enterprises and has creative assets to be unleashed.
The federal government should take the lead, as it sets the tone for the nation. Only federal leadership can establish business creation as a national priority. State and local policymakers will respect federal leadership. States set priorities within the national context, adjusting for specific strengths and needs. Local communities will follow accordingly and energize creative solutions on-the-ground, since ultimately it is local communities where entrepreneurs do their work. Entrepreneurs depend on their nearby surroundings – or local ecosystems – for opportunities and resources that encourage, support, and sustain businesses to start and grow.
One way forward is outlined in a “Field Guide for Policymakers” from the national nonprofit I head, Right to Start. The guide identifies steps to expand entrepreneurial opportunity at all levels of government. It is designed to inform elected and appointed officials, candidates for office, civic leaders, and the public – and to elevate discussion in this electoral season of ways to enhance entrepreneurship nationwide. The recommended steps include nine at the federal level, nine at the state level, and five at the local level. They address reducing barriers, increasing access, and spurring innovation, among other priorities.
All of the steps are crucial, but the federal ones affect every community in the nation. And the entire nation must rebuild from Covid-19. The recommended federal steps, each of which is described further in the “Field Guide” and accompanied by links to other materials, are as follows:
- Free to compete. Prohibit noncompete agreements that prevent Americans from starting new businesses because they are locked out by former employers.
- Cut tax hassles. Allow businesses to defer federal income tax deadlines, or to skip filing income taxes for a year if net income is below $5,000.
- Access to contracts. Dedicate a pilot percentage of 5% of government procurement dollars to businesses under five years old.
- Spur local financial innovation. Create Entrepreneurial Capital Catalyst Grants to invest in starting and restarting businesses underserved by the capital marketplace.
- More early-stage capital. Help displaced workers use unemployment benefits to start their own businesses. Pass an updated version of the State Small Business Credit Initiative, which previously invested $1.5 billion to spur $8.4 billion in small business lending.
- Easier fundraising. Pass the Small Business Borrowers’ Bill of Rights.
- Drive local learning. Redirect 5% of workforce training and economic development funding into helping Americans start businesses through local and online entrepreneurial support organizations.
- Healthcare mobility. Provide tax support for health insurance portability to Americans starting their own businesses.
- Debt relief. Defer student loan payments for Americans who take the risk to start businesses.
The nation has an extraordinary imperative to restore economic growth, rebuild jobs, and stimulate innovation in the wake of Covid-19. It is vital that we rise to this challenge by supporting the entrepreneurship necessary to revitalize growth in every community in America.
