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The Inclusive Economy
Finding Startups in Unexpected Places
By Lauren Williams on 07/19/2011 @ 02:45 PM
In Thomas Friedman’s July 12th op-ed column in the New York Times, he points out the mismatched nature of today’s unemployment problem and politicians’ approaches to resolving it. Strategies that might have created jobs decades ago simply cannot keep up in today’s economy; as Friedman says, the current job market “is not your parents’ job market.”
He’s right; today’s job market requires an entirely new mind set and skill set in order to contend. The most dynamic sectors of the economy are becoming more effective, productive and creative with fewer employees. As Reid Garrett Hoffman, author of “The Start-Up of You” said to Friedman:
“The old paradigm of climb up a stable career ladder is dead and gone. No career is a sure thing anymore. The uncertain, rapidly changing conditions in which entrepreneurs start companies is what it’s now like for all of us fashioning a career. Therefore you should approach career strategy the same way an entrepreneur approaches starting a business.”
Still, with the release of the disappointing June jobs report which featured slow hiring and a rising unemployment rate, Democrats and Republicans alike are stuck in old, dead-end debates about “stimulus versus tax cuts” solutions that fail to recognize the new realities of today’s job market. As Friedman rightly points out, the challenge today may be to invent one’s job rather than to simply find one. Friedman alerts us to the need to act entrepreneurially—to creatively differentiate oneself, to understand where growth opportunities are and to take advantage of those opportunities—in order to become employed. To take his point one step further, particularly as it relates to the debate around how to create more jobs, it’s critical that we carefully consider the potential for individuals to quite literally create their own jobs through self-employment.
Job growth in the U.S. is driven almost entirely by business startups. Though Friedman’s remarks are targeted at young college graduates and mid-career professionals who find themselves unemployed amidst the jobs crisis, the challenge of taking an entrepreneurial approach to employment applies to everyone in today’s job market. At CFED, we recognize that the challenge of literally inventing one’s own job is one that has been embraced by low- and moderate-income Americans for years. Nearly two thirds of all self-employed individuals in the U.S. earn less than $50,000 in Adjusted Gross Income and nearly 24% of all EITC filers report some self-employment income as well. This alone demonstrates that, regardless of whether these individuals aim to fill household income gaps left by underemployment or to develop high-growth firms that will hire hundreds of employees in the future, low-income individuals are acting entrepreneurially to create value where opportunity exists.
Most of the real job creators are people creating jobs for themselves, out of necessity and opportunity. Not all of these jobs are full time; not all will last, though many will. But even part-time jobs can make the difference between poverty and subsistence, dependence and some measure of independence, unemployment and employment, despair and hope. One important, but underappreciated, strategy in boosting job creation is to help non-traditional entrepreneurs—including the traditionally disadvantaged, minorities, immigrants, rural residents and Native Americans—succeed and grow businesses. At CFED, we’ve developed the Self-Employment Tax strategy, which offers a promising way to reach those entrepreneurs—using the tax filing moment to identify, reach and offer support to self-employed individuals. This strategy has been designed to help low-income, self-employed individuals formalize and grow their businesses, create jobs and access tax-based asset building opportunities. To support this effort, CFED offers technical assistance and funding to community tax preparation providers, supports related product and service innovations, conducts practice-related research and promotes sound tax policies. In the last five years, as part of this strategy, CFED has worked with community-based tax assistance providers to provide free or low-cost tax assistance to nearly 40,000 low- to moderate-income small business owners across the United States. These tax preparation practitioners have provided these taxpayers—many of whom were formerly operating informal businesses or were maintaining incomplete records—with better systems for business management, improved access to asset-building products and services and immediate access to capital through tax credits like the Earned Income Tax Credit, the Making Work Pay credit and the Child Tax Credit. With these tools, entrepreneurs can better position themselves take advantage of opportunities that will enable them to grow their businesses, incomes and wealth.
In this challenging job market, Friedman is right to highlight the need to take an entrepreneurial approach to the job market. But let’s not forget that entrepreneurs come in all shapes and sizes. As the President and policymakers seek to re-start the economy, we should not forget the critical role played by start-up businesses, including those found in unexpected places.
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