Monday, July 6, 2015
By Derek Thomas
This blog post was prepared for
the Indiana Assets and Opportunity Network. A collaboration between the
Indiana Institute for Working Families (IIWF), Indiana Association for
Community Economic Development (IACED) and Local Initiatives Support
Corporation (LISC).
Included in a recent report from the Indiana Chamber of Commerce –
‘Indiana
Vision 2025: A Plan for Hoosier Prosperity’ – was the Kaufman Index, a measure of entrepreneurship in the
U.S. According to the Index, Indiana ranked 44th in 2015, up from 48th
in 2014. Just 0.23% of the Hoosier adult population becomes an entrepreneur in
a given month (that’s 230 out of every 100,000 Hoosier adults). The top state
is Montana with a rate of 0.54%. Vermont, Alaska, New Mexico and California
round out the top five, and nearly half of U.S. states have a rate of 0.30% or
greater.
These measures are consistent with ‘Businesses and Jobs’ indicators released by the Indiana Assets and Opportunity Network. Created by Washington
D.C.-based Corporation for Enterprise Development (CFED), the 15 measures are
concerned, holistically, with both ownership and job quality: Indiana ranks 38th. Among other factors, only 1.37% of
Indiana residents own their own small business.
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In its press release, the Chamber cites a “significant decline in venture capital invested”
from 2012 to 2014. Indeed, “in terms of venture capital funding, [Indiana is]
36th with per capita spending levels far below the national
average,” according to a recent op-ed from Indiana University President Michael A.
McRobbie, in which he cites the role that universities play in creating a
stronger Indiana by attracting research dollars.
There are, however, additional ways that
policymakers can create a business-friendly environment for all would-be entrepreneurs
through programs such as individual development accounts (IDA) and self-employment
assistance (SEA).
INDIVIDUAL
DEVELOPMENT ACCOUNTS (IDA): IDAs are matched savings accounts that enable low- to moderate-income
individuals to save money and build financial assets for the specified purposes
of purchasing a home, paying for postsecondary education expenses, or starting
a small business. Matched savings are exchanged for core financial literacy
training and goal-specific training around growing assets for would-be
entrepreneurs, homeowners, or students. Small business training helps
recipients develop target markets; write a business plan; develop a marketing
plan; and learn about small business loans and other resources for
entrepreneurs. The program has a rich and successful history in Indiana. Aside from its high
savings rate, 128 of the 5,657 (2.3%) accounts opened from 2009 – 2012 resulted
in business start-ups, according to Indiana Housing and Community Development
Authority.
SELF-EMPLOYMENT ASSISTANCE (SEA):
By removing regulatory barriers from Indiana’s unemployment insurance
system, policymakers can help to unleash entrepreneurship for laid-off workers.
Unlike traditional unemployment insurance in which benefits are exchanged for
work-search activities, SEA participants are required to take part in
entrepreneurial training (perhaps using
IDA training as a vehicle?). Currently, only seven states in the U.S. have
the program, but its success secured SEA a home in the bipartisan Middle Class Tax Relief
and Job Creation Act. The Hamilton Project cites evidence from the “Massachusetts
SEA program [that] strongly suggests that receipt of unemployment benefits
combined with enterprise training can help the unemployed transition into
productive employment, and can do so cost-effectively.”
