When I was a kid, my
parents started a business.
They started a dental
assisting school.
We had health insurance
through Medicaid.
We were on food stamps
for several years.
The fact that they knew
that if things really
went poorly with
the business we'd
be able to go to the doctor.
If something happened
we'd be able to eat.
I started thinking about
what that meant given that we
didn't really have a lot.
I got this piece of advice
from a friend who just said,
you know when you're a
writer, write what you know.
So maybe you should do that.
Maybe I should start
studying what I know.
I study how public programs
like food stamps and health
insurance help people
start businesses.
The way the US
economy works, it's
built on people taking risks,
being innovative, starting
a business, even changing jobs.
So it's a big priority.
People are interested
in entrepreneurship.
Small businesses tend to
drive net job creation.
The question is,
how do we actually
have an effect on small
business creation?
Most public policy
is focused on access
to credit, which is important
with helping people get loans.
But nobody really
talked about risk.
If you reduce the risk
of starting a business,
does that affect
people's behavior?
Does it make them more
likely to take a leap?
And when we think about how
expensive public programs are,
they're extremely expensive.
I think we also need to
understand all the benefits.
And I think this is one of the
pieces that has been missing.
We need to be
thinking about what
people do with the
opportunity we're giving them.
And that's a question
you can answer with data.
And that's a question
we should try to answer
with data instead of rhetoric.
We should be replacing
ideology with numbers.
What I found in
these studies was
that if you give people access
to public benefits, like food
stamps or public
health insurance,
they're much more likely
to start a business.
And I find the effects
are pretty large.
On average, about 9% to
11% of the US population
has a small business.
If you give someone a
guarantee of health insurance
for their children, I found a
25% increase in the likelihood
they start a business.
That translates to about a 2
to 3 percentage point increase.
From an economic standpoint
it's a sizable effect.
The food stamp effects
are a little smaller.
Food stamp recipients
are credit constrained.
It's difficult for
them to get a loan.
They don't have the
collateral needed
to get a small business loan.
But even among that group,
who are often written off
by politicians, if you give
them a guarantee of some income
support they take a risk.
And many of them
start businesses.
I found about a 10% increase
in small business formation
among food stamp
recipients as the program
expanded in the 2000s.
It turns out these
businesses are much more
likely to be incorporated
than average,
which is a signal that
they're going to grow and hire
employees.
And so when we think about this
new class of entrepreneurs,
we need to be thinking
about whether they're going
to be high quality or not.
And I think the early evidence
is showing that, in fact, these
are people who would be
fantastic entrepreneurs.
They'd be great business owners.
But they're just
constrained in some way.
And we can alleviate some
of those constraints.
If you really want to
encourage entrepreneurship
across the board the way we
think about small businesses
kind of in a day-to-day sense,
like corner shops and barbers
and hairdressers, we need to
focus on populations that maybe
haven't been served
well by the way we think
about entrepreneurship policy.
I want to reset that
discussion and say
these are questions we
can answer with data.
And the data are pretty
clear that if you expand
public programs, you actually
encourage entrepreneurship,
particularly if you reduce the
risk of starting a business.
