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Posted by on Mar 9, 2014 in Blackacre, Business, Employment, Progressive policy, Public Policy, social welfare, Socio Economics | 0 comments

Employment vs Entrepreneurship, The Case for Small Business Devevelopment

Finally, the economy is improving. “American businesses reported that third quarter profits in 2010 rose at an annual rate of $1,659 trillion, the steepest annual surge since officials began tracking such matters 60 years ago. It is the seventh consecutive quarter in which corporate profits climbed.”[1] Nevertheless, unemployment is still a problem.

Defined as the percentage of the total workforce who are unemployed and are looking for a paid job, the current national unemployment rate is 6.7%; a misleading figure at best. By definition those who are so discouraged that they have stopped looking for work are not considered. The same is true of the underemployed and the unemployable. When these additional groups are considered, the nation’s unemployment rate is closer to 20 to 25 percent, if not higher.

A high rate of unemployment in the face of soaring profits and worker productivity is more than a singularity. It instead represents a long term trend. The recent collapse of the housing market, the crises in the financial markets and the general downturn of the economy have created a huge slack in the labor market. Corporations are therefore in a very strong position while workers are in a very weak one. As more and more jobs go overseas the imbalance of power between employers and employees continues to grow. Not surprisingly, employers are taking full advantage of their dominant position.

“Corporate leaders are paying themselves well and with demand so low, they are not incentivized to add more workers.”[2] Even if hiring does improve, gone are the days of full time position with benefits, pensions and salaries sufficient to support a family. “Corporations are using their power to cut benefits and wages and to shorten hours”. [3]The result is long term unemployment for the traditionally employed. With unemployment benefits set to run out for many, the situation of the unemployed has never been more dire.

The public policy approach has been to make us more employable. This approach is well intended. However, it has not proven effective in part because meaningful employment opportunities simply don’t exist. The jobs that are available are low wage or minimum wage services positions which are insufficient to support a family.

In addition, many segments of society are unemployable. No matter how much training and job assistance they receive, they are unlikely to find suitable employment. These segments include but are not limited to:

  • The elderly and the long term unemployed who face real and material barriers to employment in the form of age discrimination and the propensity of hiring managers to avoid hiring the unemployed.
  • The uneducated (those who lack a high school diploma), and the functionally illiterate.
  • Single parent households with young children.
  • Those who suffer from family instability, physical disability, mental illness or chemical addiction.
  • Ex-offenders including those who have paid their debt to society.  Saddled with criminal records the criminally convicted and formerly incarcerated cannot pass background checks, enter into contracts, associate with others or engage in certain professions or endeavors. As recently as 2011, the American Bar Association estimated that there are 40,000 laws and policies that discriminate against the formerly incarcerated.  Sadly, these legal albeit counterproductive forms of discrimination show no sign of abating.
  • Veterans including those who have served in combat. The May 25, 2012, edition of USA Today reports that “a staggering 45% of the 1.6 million veterans from the wars in Iraq and Afghanistan are now seeking compensation for their service related injuries. This is more than double the estimate of 21% who filed such claims after the first Gulf War. Government officials and some veteran advocates say that veterans who might have been able to work with certain disabilities may be more inclined to seek benefits now because they lost jobs or can’t find any.”

 

According to the Sunday, May 27, 2012 edition of the Dallas Morning News, Section A, p.1, “the Veterans Administration estimates that 2,500 veterans a night go to sleep homeless in north Texas alone. The article further quotes the March 2010 government report, “Health Care for Homeless Veterans. “Nearly 145,000 veterans spend at least one night a year in an emergency shelter. From poverty, to substance abuse, to post traumatic stress syndrome, to mental illness veterans suffer a range of maladies that require a comprehensive approach including substance abuse therapy, mental health services, housing programs and job training.”

Perhaps there is a better approach. We are after all a capitalistic society where business is king. Blackacre therefore proposes that instead of creating more employees we direct our efforts at building a new class of entrepreneurs. We further propose that this initiative be directed at specific “entrepreneurial niche markets”. In no particular order, these markets include:

  • The Recently Unemployed:  The formerly employed, including long term workers struggling with long term unemployment makes an excellent source of new entrepreneurs. The positives of focusing on this target group include:
    • They tend to be older, mature, realistic and personally responsible. These positives reduces if not eliminates concerns about character and instability.
    • Their long work history carries additional benefits. The recently unemployed tend to be professional and possess a number of skill sets that can be easily transferred to operating a business.  They further possess solid work ethics and habits.
    • They are eager and hungry for success.
    • They bring more resources to the table, even with the downturn in their personal fortunes,
    • Thus, they can more easily meet underwriting criteria and operate a successful business.

 

  • Older Entrepreneurs: Are a relatively untapped market for entrepreneurship and creates unlimited workforce development possibilities. Older entrepreneurs have many of the same attributes of the recently unemployed. They are viewed favorably by most segments of society and have institutional support from groups like the AARP, the Small Business Administration and local units of government.

 

  • Veterans: Also posses the positive lending attributes of maturity, dependability, responsibility, personal assets, knowledge and experience. This group is also viewed favorably by society and significant resources are dedicated to their well being, especially those returning from Iraq and Afghanistan. This good will places at their disposal multiple public and privates sources with “deep pockets”, including but not limited to all branches of the Armed Forces and the Departments of Veteran’s Affairs, Defense and Homeland Security.

 

  • Non-Profit Organizations: Many non-profits are struggling for donors and new sources of funding. With the tightening economy, there is a growing need for charitable organizations and non-profits to cash flow. What better way to do so then by engaging in a deliberate and ongoing pattern of social capitalism and non-profit business ownership.

 

  • Young College Age Homeless People: Across the country tens of thousands of underprivileged and jobless young people, many with college credits or work histories are struggling to house themselves in the wake of the recession which have left workers between the ages of 18 and 24 with the highest unemployment rate of adults. “New Face of Homeless”, DMN, 12-24-12, Section D, p. 2. Fortunately, this group has knowledge, skills and personal attributes which are suitable for entrepreneurial development.

 

  • Formerly Incarcerated Persons: FIP’s are not typically possessed of positive personal attributes. In fact, FIP’s tend to have the worst business profiles. They therefore poses significant entrepreneurial and employment risks. Nevertheless, the formerly incarcerated is a viable entrepreneurial market.

 

Like the Veterans, FIP’s are the subject of significant financial and societal attention. And since FIP’s are chronically unemployed, if not unemployable, nowhere is the need greater for small business and workforce development.

 

  • At Risk Youth: Ask the typical at risk youth what he wants to be and at least half will respond a “rapper” or a “baller”. Without question, sports and entertainment are viable career and entrepreneurial options. Sadly, our youth focus only on the “show” part or show business, paying scant attention to the “business” component of sports, art and entertainment.

 

As to sports there are management, coaching, agent, health and physical fitness, writing, announcing, facility management, grounds keeping, refereeing and choreography career opportunities. There are also other sports in which to excel like golf, tennis, baseball, hockey, volleyball, badminton, table tennis, swimming, diving, skiing, bowling, etc. Stated differently, there is more to professional sports than merely putting a ball through a basket.

The same is true of the performing arts. In addition to acting, singing, dancing and “rapping” the performing arts include directing, lighting, set design, staging, make-up, costume design, clothing, music, carpentry, writing and special effects.

More fundamentally, there are ownership possibilities. At-risk youth are entrepreneurial. Most have their “hustles”, i.e., various ways of making money. They baby sit, or do hair in their basements. They produce and sell C D’s from the trunks of their cars. They cook and sell food, give parties and organize church functions. And street pharmacologists, otherwise known as drug dealers are the epitome of small businessmen, skilled in the art of marketing, customer relations, supply and demand, inventory and pricing.

We make no attempt to romanticize or legitimize criminal, self destructive activity. Drug dealing is a scourge on society that we have yet to eliminate. The material point is that real and substantial entrepreneurial skills already exist in these niche groups and to some extent exist in abundance. The key is to take these business skills and direct them towards legitimate business pursuits.

Nor is the entrepreneurial approach without its difficulties. These and other niche markets tend towards negative lending profiles. The knowledge, skills and attitudes necessary to operate a successful business or to meet loan underwriting criteria may well be low if not completely absent. Actual business acumen/experience/instincts are usually non-existent. Even when the “would be” mogul is cooperative and has a sound business plan or model, significant time, energy and resources are still necessary to make him or her “business ready”.

Moreover, the expectations of many are questionable. Operating under the mistaken belief that an affinity for cooking, the desire to fix cars or good faith enthusiasm guarantees business success, many entrepreneurs engage in enterprises in which they have no experience or that have high rates of failure. While ability and enthusiasm are helpful these attributes are seldom enough. Business success is never guaranteed even in the best of circumstances.

In conclusion, this is not a contest between employment and entrepreneurship. The solution is to pursue both. Nonetheless, we should not squander our resources by provided job training for illusionary employment. If we can’t employ the unemployed; if we can’t find jobs for the unemployable, then let’s turn them into small business owners. We all benefit if the unemployed can employ themselves if no one else.

Leo Barron Hicks, Founder and CEO, Blackacre Policy Forum


[1]Michael Powell, “Profits are Booming, So Why Aren’t Jobs”, The Dallas Morning News, Sunday, January 6, 2011, Section P, p. 4D.

[2] Ibid.

[3] Ibid.

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