Strong social safety nets encourage entrepeneurship

November 14, 2011 4:25 PM

Safety nets: hammocks or trampolines? Academic James Wimberley argues that the supposedly entrepreneurial USA fares poorly on business startups, and attributes this to the relative absence of a comprehensive social safety net.(via)
posted by wilful (44 comments total)

Yeah, its killing small business in the US.
posted by fshgrl at 4:30 PM on November 14, 2011 [1 favorite]

Does count of LLCs really correlate directly to the number and quality of startups? That seems to be the basis for all the numbers.
posted by smackfu at 4:31 PM on November 14, 2011

Kinda self evident but glad that someone's saying it.
posted by octothorpe at 4:36 PM on November 14, 2011 [1 favorite]

Does count of LLCs really correlate directly to the number and quality of startups?

Number? Yes I would have thought so, isn't that precisely what's measured?

Quality? Not measured. How could it be?
posted by wilful at 4:37 PM on November 14, 2011

Obviously. Healthcare especially.
posted by delmoi at 4:39 PM on November 14, 2011 [6 favorites]

My wife was able to go into business for herself due to being able to get on my (employer subsidized) health insurance. Simply would not have been possible otherwise.
posted by MrMoonPie at 4:45 PM on November 14, 2011 [4 favorites]

Well, if this were true, wouldn't there be an uptick in new business startups as people reach age 65? Oh, wait...there is.
posted by idb at 4:47 PM on November 14, 2011 [19 favorites]

I wish he had ranked all the countries by "safety net" then done a correlation.
posted by smackfu at 4:49 PM on November 14, 2011

I thought this was going to be about some brilliant entrepreneurs who invented safety nets for trampolines and hammocks.
That means the idea is still available for me to exploit.
posted by dances_with_sneetches at 4:50 PM on November 14, 2011 [3 favorites]

I lived and worked in the US for a number of years - and I loved it. But when it came time for my company get my green card - I said no. I wanted to eventually start my own business, but when COBRA costs well over a thousand a month and healthcare can really make or break you - the risk was too much and I went back to Canada. Within a month of returning I had a small consulting practice up and running.

American's are some of the smartest and most naturally entrepenurial people in the world. Straddling them with the social safety net costs is really dragging down people's ability to innovate and create new businesses.
posted by helmutdog at 5:03 PM on November 14, 2011 [2 favorites]

American's are some of the smartest and most naturally entrepenurial people in the world.

What, is it genetic?

Straddling them with the social safety net costs is really dragging down people's ability to innovate and create new businesses.

I think you're missing the phrase "lack of".
posted by wilful at 5:08 PM on November 14, 2011

When I tried to start a business where I straddled people with a net, the cops shut me down.
posted by box at 5:13 PM on November 14, 2011 [7 favorites]

I think you're missing the phrase "lack of".

No because the small American entrepreneur is the one that has to pay those costs for their employees. They're effectively saddled with the cost.
posted by Talez at 5:17 PM on November 14, 2011

box: "When I tried to start a business where I straddled people with a net, the cops shut me down."

I did this and people loved it! They wanted me to boss them around and flog them, too. I can never tell my parents about my successful enterprise, sadly.
posted by mullingitover at 5:18 PM on November 14, 2011 [2 favorites]

In Norway, Startups Say Ja to Socialism
posted by Afroblanco at 5:23 PM on November 14, 2011 [1 favorite]

American's are some of the smartest and most naturally entrepenurial people in the world.

What, is it genetic?

Straddling them with the social safety net costs is really dragging down people's ability to innovate and create new businesses.

I think you're missing the phrase "lack of".

It's not genetic - but it's something that comes naturally with the culture in the US. There is a spirit of getting out there and working through barriers. But healthcare costs are through the roof and for a small start up the premiums are heavy duty and medical costs are staggering. Not sure why this brings out the snark.
posted by helmutdog at 5:24 PM on November 14, 2011 [2 favorites]

I've started a couple dozen person company and have to admit the first leap was pretty scary. The ability to get high deductible health insurance and no kids was the only thing that made me feel okay about doing it.

Maybe if I could be on wife's that would have been okay, but it was really tough to get early folks who couldn't make that same leap until we hit a big enough critical mass to get health insurance etc.. for them.

With a couple kids, it was be really hard to start a company without my wife working full time to get her own insurance for the family.

More and more I think that small business wants a social safety net, big business wants people scared.
posted by bottlebrushtree at 5:24 PM on November 14, 2011 [5 favorites]

The actual place of small business is not as clear as soundbites would have you think. For instance, Matt Yglesias points out that Italy - not a model of economic dynamism anyone would want to emulate - has relatively more small businesses than the US.

But really, there is a lot of "everyone knows" but no one has checked. For example, the 0.18 of firms who are have 1000 employees or more are responsible for 38% of the private secotr jobs in the US today. On average (1992-2010) that same tiny sliver of firms are responsible for 29% of new jobs in the US. You can see this for yourself here.
posted by shothotbot at 5:25 PM on November 14, 2011 [3 favorites]

I thought this was going to be about some brilliant entrepreneurs who invented safety nets for trampolines and hammocks.
That means the idea is still available for me to exploit.

Don't quit your insurance-providing day job!
posted by rtha at 5:27 PM on November 14, 2011 [1 favorite]

I'm sure much of this is true -- but both NZ and Iceland are small, isolated islands, where multi-nationals may not find it worth their while to corner the market.

Mind you, this doesn't apply to Canada, which, I notice with delight, is #3 on this list. And my Kiwi friends always did say that New Zealand had a real 'DIY' culture.
posted by jrochest at 5:30 PM on November 14, 2011

A snap shot of one year?

He may or he may not be right, but surely he needs a bigger sampling than this.

I did read once somewhere that more women than men are entrepreneurs in America. The punch line was that they had the security net of an employed husband. I have no idea if this is true or not.
posted by IndigoJones at 5:30 PM on November 14, 2011

I started two multimillion dollar businesses, that employed several dozen people each, and I was able to do so largely because I had no student loans, good health, no concerns for the basic livelihood of my children (I have none) and the incredible good fortune to have parents that could subsidize my living expenses for about a year in the city ideally situated to start my business. I personally hit the socioeconomic jackpot. Still, there were many people who I couldn't hire because they couldn't take on the risk themselves, and arguably, my first company could have been more successful if my initial hiring options weren't also limited to a set of people with similar circumstances to my own.

Student debt, implausibly expensive private health care and insurance, and an almost complete lack of unemployment benefits if you try to do anything remotely entrepreneurial essentially create a middle class stuck in indentured servitude. Sure, you, or maybe a few other people might have been able to claw your way out, but really, wouldn't it be better if it was much easier for everyone to actually, you know, create jobs?

For those who claim moral hazard, would you really not have taken the chances you took if your existential risks were slightly diminished? I personally highly doubt it. I know that I actually probably would have started earlier, took bigger chances, with greater intrinsic risks (you know, companies that either change the world or fail, risks that are part of the business), and greater potential rewards. Moral hazard is problematic when you have situations like the modern banking industry, whereby failure is marginally less profitable than success. That can hardly be said of providing health care and welfare.
posted by Freen at 5:46 PM on November 14, 2011 [19 favorites]

People who scream moral hazard in relation to their views on economics are always trying to have it both ways.
posted by Benny Andajetz at 5:52 PM on November 14, 2011

There is no reason why, in a society which has reached the general level of wealth ours has, the first kind of security should not be guaranteed to all without endangering general freedom; that is: some minimum of food, shelter and clothing, sufficient to preserve health. Nor is there any reason why the state should not help to organize a comprehensive system of social insurance in providing for those common hazards of life against which few can make adequate provision.

- Friedrich Hayek in the Road To Serfdom

You have to be further right than Hayek to be against some socialized risk reduction. [Source]
posted by Freen at 5:54 PM on November 14, 2011 [8 favorites]

The underline was unintentional, but actually makes sense, emphasizing how crazy it is to want to remove the social safety net.
posted by Freen at 5:55 PM on November 14, 2011

American's are some of the smartest and most naturally entrepenurial people in the world.

What, is it genetic?

They must be thinking of the native american casino gene.
posted by srboisvert at 6:17 PM on November 14, 2011 [2 favorites]

Does count of LLCs really correlate directly to the number and quality of startups?Number? Yes I would have thought so, isn't that precisely what's measured?

Many, many LLCs (or equivalents, in jurisdictions that don't have LLCs) are formed as special purpose entities by established firms.

posted by planet at 6:29 PM on November 14, 2011 [1 favorite]

American's are some of the smartest and most naturally entrepenurial people in the world.

What, is it genetic?

The population of the US today is overwhelmingly made up of people who came to try their luck in a new place and descendants of those people. It's not genetic, because the immigrants came from all parts of the world, but it's pretty easy to see how such a culture could develop.
posted by snofoam at 6:38 PM on November 14, 2011

Oops, on second thought, I wasn't referring to smartest, but just the culture of entrepreneurship. I'm not inclined to speculate about how "smartness" corresponds to nationality.
posted by snofoam at 6:41 PM on November 14, 2011

Well, if this were true, wouldn't there be an uptick in new business startups as people reach age 65? Oh, wait...there is.

How did Colonel Sanders get the seed money for Kentucky Fried Chicken after one of his businesses failed? With a Social Security check.
posted by jonp72 at 7:08 PM on November 14, 2011 [6 favorites]

Well, way to restate something I thought everyone already knew. I guess maybe this is news to people who don't know anyone who actually has started a business?

I mean, healthcare costs singlehandedly killed my dad's small business, which employed multiple people for over a decade. I think this is a pretty common story. Anyone who thinks having to pay through the nose for healthcare for a small number of people isn't extremely destructive to entrepreneurs and their needs is dreaming.
posted by troublesome at 7:15 PM on November 14, 2011 [2 favorites]

If I didn't have to worry about anyone I hired not having healthcare, I probably would have expanded my business and be running a several-person shop now. But I don't need the stress. Hell, it's stressful enough in my own solo business.
posted by maxwelton at 7:35 PM on November 14, 2011

If I didn't have to worry about anyone I hired not having healthcare...

This is why everyone I hire lives in-state in Massachusetts. I can't think of a simpler way to promote job creation.
posted by nev at 7:41 PM on November 14, 2011 [1 favorite]

The only reason I'm able to work as a freelancer and not have to scramble for an office job when I get laid off is the wife works and has decent health insurance. Neither of us have serious problems, but we've had some minor surgeries come up lately and we both have chronic, treatable conditions that require regular medication.
posted by Ghostride The Whip at 8:10 PM on November 14, 2011

Kind of reminds me of the caller I heard on some NPR show a few weeks back at the start of the Occupy protests. He called in to complain about how all these people just weren't investing themselves and how government never creates jobs, and then went into his tale (told with much indignant anger in his voice) about how he went into the military right out of high school, worked until he could retire, and then started a trucking company with only three trucks and how it's now some kind of major shipping company employing thousands.

I was angry that the host of the program didn't point out that 1) he had worked in a government job, and 2) he had retired with a pension and lifetime health care benefits.

It's exactly that kind of safety net which allows people to step out into risky business attempts. I'd be able to do all kinds of things if I had a retirement pension and full health care and had all those things while being young enough to invest myself into a new enterprise.
posted by hippybear at 8:59 PM on November 14, 2011 [5 favorites]

I am satisfied with the 'safety nets' available to us. High deductible insurance isn't so great, but state plans and medical expense sharing communities are very good. The annoying thing is the healthcare bump in the middle of growing from startup to successful.
posted by michaelh at 9:16 PM on November 14, 2011

I'm glad you're satisfied.

Meanwhile, I have a sinus infection and a recurrence of my depression, and had to stop paying for COBRA because it was $1500/mo after the one year of subsidy from my former employer, so I have absolutely no heath coverage, and my unemployment is about to run out despite sending out 35 applications a week that I'm lucky to get one response from.

So I guess I'm not terribly satisfied about it.

(and to the acephalics who think that I deserve this, like Michelle Bachmann and pretty much every Republican elected to Congress, please understand I am seized with the desire to urinate in your coffee at the very least.)
posted by mephron at 10:55 PM on November 14, 2011

mephron: yeah, my partner is about to leave the place we share to live in Montreal until he retires in 7-10 years. Because he couldn't find a job locally, and the one job he could find was a limited contract, the taking of which negated his ability to receive further support from unemployment.

If you're really in need of medical care, it's a bit of a horrid endurance test, but there are probably community health centers you can go to for help with getting some antibiotics for your sinuses and maybe even some antidepressants if that's what you've used in the past to help with your problems.

Overall, this whole situation is feeling more and more like it contains echoes of the great depression, as people continue to be out of work for so long that they abandon their lives and move back in with relatives, as people end up moving away from loved ones to find work elsewhere, as people end up looking toward the government and charities in order to find health care and even food to keep them alive.

My thoughts are with you, mephron. I hope you find relief and a job soon.
posted by hippybear at 11:08 PM on November 14, 2011

Mephron, that sounds miserable, but perhaps it's a state thing. Illinois takes good care of several people I know who have recurring expenses.

Also, medical expense sharing groups would take you even with that condition -- the one I looked at would only refuse diabetics and even then there was a possibility to be helped anyway.

COBRA is lousy for sure.
posted by michaelh at 8:09 AM on November 15, 2011

If the chart in that email tells me anything, it's that a social safety net has absolutely nothing to do with how many new startups there are.

Interesting that the UK is so high though. I would have assumed the UK would be low.
posted by seanyboy at 8:21 AM on November 15, 2011

If I were to look at anything, I'd look at attitudes towards individualism and the role of the individual within the organisation. New Zealand, Iceland high. Japan, Germany low.

I'd say the percentage chance you're going to tell your Boss to fuck off correlates with your position in this chart. It may be that Americans have more of a tendency towards working for the man.

/stereotyping
posted by seanyboy at 8:29 AM on November 15, 2011 [1 favorite]

Mephron, once you get a prescription you can get cheap generics at walmart
posted by zia at 1:09 PM on November 15, 2011

Speaking of strong social nets, the Spokane Neighborhood Action Program, which has worked to help needy households with heating bills and to make their homes more energy efficient for winter months, has had their funding cut by half due to federal cuts.

That means that 6500 households may have to make difficult decisions when it comes to heat this winter.

Since the weather report tonight is for 16F, and it's only mid-November, I'm willing to bet there will be a lot of people who will be piling on the covers instead of having the heat they need to feel even vaguely comfortable in their dwellings.

I'm sure some would say, if you can't find the way to earn the money to be warm during the winter, you deserve to be cold. Personally, as someone who keeps his house a bit below what most consider comfortable and yet is happy for the heat I do have, I think this is a shitty attitude.
posted by hippybear at 8:37 PM on November 15, 2011 [1 favorite]

zia: and very cheap generics at Costco, which means the $65 for there is actually very helpful.

I just feel that it's ridiculous that I, and you, and hippybear and his partner, and almost everyone in this thread, have to deal with the insanity of insurance, and hoping things might be covered by the state (or at least I can afford something, God help me when the unemployment runs out)...

And the Idiot Brigade at the Federalist Society can get Scalia and Thomas at their dinner, a dinner thrown by the lawyer going to argue AGAINST the health care reform bill, and then Dumb and Dumber can sit back and try to appear impartial on the judicial level after an act that a lower court judge would be thrown out of office for.

http://www.latimes.com/news/politics/la-pn-scalia-thomas-20111114,0,7978224.story if you want to see it.

There are honorable, thoughtful conservatives, and then there are these representatives of Dictyostelium discoideum who you can't even shame in public because it bounces off their aura of sanctimony! It may need to be the fire next time.
posted by mephron at 12:22 AM on November 16, 2011