Thursday, January 31, 2008

why less entrepreneurs are better for the economy

this line caught my eye today:

"Having fewer entrepreneurs means that we are experiencing economic growth."

what do you think?

before leaving a comment, read the rest of this very brief article.

- - -

in this context, now what do you think?


Lou said...

I feel the opposite.

People start businesses when they see opportunities available that their present employment can't match.

Having a wife laid off two years ago after having another child, I can truthfully say that staying at my crummy job was a lot more palatable than looking for other work or starting a business, and a lot less risky.

I didn't get promoted until I went in to management and basically said, "The crisis is over. Give me what I want or I'm gone by the end of the month."

Angie said...

That's one explanation. Or could it be the unaffordability of individual health insurance?

Christopher Barzak said...

I think his theory only goes so far. It would be fine if the mega-businesses he seems to think are better than small businesses actually paid a good wage as well as good health benefits to their workers and workers' families. As it stands, they do not. So, like so many other economic analysts, his analysis is all about numbers, which, when you look at them, it does seem as if the economy is growing. But when you look at people who can't afford health care, who are losing their homes, the numbers don't really mean much to me at all. Analysis of economy that does not factor in the reality of a people's living conditions--which, frankly, the economy should be a reflection of, as the word's etymology does go back to "the state of the home or dwellin"--is nothing more than a show of irresponsibility and blindness to the meaning of the subject matter they're supposed to be examining.

Debra Weaver said...

My career experience leads me to believe that the author of the article is correct. When there are large companies employing people it makes less sense to start a small business. Primarily because it is very expensive to operate a small business. Two of the largest expenses are matching 1/2 of the employees social security tax, and paying for health care,(even if it isn't for employees but merely yourself and your family. Another problem is that for most small businesses (particularly those that are service oriented), profits are so minimal that the entrepreneur must find other means of support until the business is viable. My business experience leads me to believe that it takes from 2-3 years for the average service business to make enough to show a profit. So I believe that the author is correct, most do not go into small business unless they have lost their jobs, need a second income, or can't find anything other than low wage jobs in their area. This isn't to say that there are not creative, passionate entrepreneurs that are compelled to start their own business regardless of economic conditions. It is this kind of entrepreneur that Y-town needs. When we get them, they need our ongoing support. As an aside, I would like to say that for many small businesses one of the biggest hurdles is acquiring nuts and bolts knowledge of business. Entrepreneurs are often very good at performing a service, or making the product that they want to sell, but they are sorely lacking in business skills. Small businesses are often also at a disadvantage because they can't afford to pay for the accountant, the lawyer,or the managers that they need to make the business viable. This is why non-profits such as the Youngstown Business Incubator are such a blessing! Also, I agree with Chris. The current economic indicators are not a very good reflection of what the economy looks like here on the ground so to speak. However,when comparing a low wage job vs. let's say a small retail shop, my guess is that initially the person working minimum wage is going to have greater income. I don't like to make blanket statements like that as there are always exceptions, but I can't stress enough how important it is for the potential entrepreneur to do their homework before investing their life savings into a small business.

Ed Morrison said...

There's a difference between entrepreneurship and self-employment.

There is also a difference between "sheltered" small businesses (serving a local market) and emerging, traded businesses serving a larger market.

Sadly, you can't make much of the SBA data, since it does not allow for much segmentation. (There are other data sets on firm births and deaths that are more revealing).

Shane is simply reading too much into shallow data.

Anonymous said...

I agree with the last comment. You just can't take data out of context like this. He fails to meantion for instance that so many of the largest high growth companies have actually been around less than 20 years. Cisco, Google, Yahoo etc.. Take a peak at the Dow industrial average in 1930 and see how many companies you recognize.

He also fails to understand the fact that many small business owners are not primarily motivated by money. Many are trying to do things they love and are seeking a level of control and flexibility in their lives and many achieve this in spite of earning less.

alie1313 said...

I totally disagree with this argument. Big business may be more "efficient" but it also doe snot allow for companies to adjust to the individual needs of its employees. The larger the company the more government regulations, the more policies and procedures that need to be in place and the more administration that is necessary. I have a lot of friends with small businesses, their employees allow more flexibility and they are able to be more efficient in terms of getting the work done.

I worked for myself for a year and a half, the only downside was that I did not have the stability I want in my life right now. But, even though I made less money I made more because so many things could be taken as business expenses. Now I have to pay for my cell phone, pay for my internet, and cannot claim my home office as an office anymore. Entrpenuers allow people to explore and to come up with new ideas and to grow jobs. A big bix employer has so many jobs to offer and when they are full, they are done. An entrepeneur has the motivation to create more work and to begin to grow because growth translates into more profits and better stability.