Small Business

On a Friday night in early June, eight strangers came up with an idea to help poor Americans on government assistance gain access to healthier food. They designed a website and business model to help overcome a problem referred to as urban “food deserts –– that many low-income Americans in big cities live miles from the nearest grocery store. After three days, the eight strangers, which included the two authors of this piece, pitched the company and won a little prize –– the invitation to present the solution at an international summit organized by the World Bank and the White House.

"For all its current economic woes,” the Economist magazine recently asserted, “America remains a beacon of entrepreneurialism.” That idea is at the heart of America’s self-image. Both parties celebrate entrepreneurial small business as the fount of innovation and growth. Even if America no longer manufactures its own smartphones or computers, we cling to the idea that American entrepreneurs invent most of the new products and services that matter to the world.

Editor's Note: This is a guest blog post authored by Lina Khan, program associate with New America's Markets, Enterprise and Resiliency Initiative.

If there’s one thing Americans have faith in it’s the country’s entrepreneurial verve. Even amid high unemployment and a tepid economic recovery, we generally believe that strong entrepreneurship and upstart businesses will help steer us out of our present ditch. Media reports and sparring politicians fixate on this crucial sector of the American economy, a source of new products, new ideas, new jobs, and new wealth.

An article published today shows that America’s entrepreneurial sector is actually in deep crisis. The piece, written by Barry C. Lynn and myself in the forthcoming issue of the Washington Monthly, shows that for over a generation fewer Americans have been creating new businesses. The nation’s self-image notwithstanding, the number of new entrepreneurs – measured per capita – declined by 53 percent between 1977 and 2010. Even the share of self-employed Americans has fallen, dropping by more than 20 percent between 1991 and 2010.

America’s entrepreneurial sector is in deep trouble. Although the mainstream media continues to promote the idea that the nation’s small and upstart businesses are either generally thriving or, at worst, recovering from the sudden blow of the Great Recession, a closer look at the data reveals the exact opposite to be true, with a long-standing decline in the numbers of independent startups per working-age American.

The Asset Building News Week is a weekly Friday feature on The Ladder, the Asset Building Program blog, designed to help readers keep up with news and developments in the asset building field. This week's topics include anti-poverty initiatives, access to financial services, and inequality.

A recent statement from the Senate Finance committee outlined how small business health insurance exchanges, tax credits, and grants for workplace wellness as part of health reform would all make quality coverage more available and affordable for small businesses.

In a The Washington Post op-ed today, Health and Human Services Secretary Kathleen Sebelius reminded us why we're talking about health reform in the first place -- because Americans want peace of mind.

Health care is not supposed to be a guessing game. Americans who have coverage should not have to wonder -- am I going to be dropped from my plan if I get sick? What happens if I lose my job? No one should be one illness away from bankruptcy. No one should have to choose between food and shelter and medicine for themselves or their children.

The HHS Secretary says that in the current system, health insurance companies have all the power. They can deny coverage for pre-existing conditions, cherry-pick who gets covered, offer bare bones coverage plans, or charge sky-high premiums. For Sebelius, peace of mind means putting power and choice back in the hands of consumers. In a system that promotes health care coverage choice, "insurance companies... will know that if they don't deliver a great value, their customers will flee."

For small businesses the economic hits just keep coming, and as the New York Times reminds us, the hardest hits are often from health care.

The Times' Kevin Sack profiles several small business owners faced with a difficult choice: cut health care benefits or close their doors. Amberly Allen, who runs her own direct-mail firm, spends 17 percent of her firm's payroll on employee health benefits. Thomas L. Fritts, who owns a sporting goods store in Illinois, saw his company's health care costs rise 30 percent last year while his business's sales plummeted 60 percent.

Small business owners are shifting a greater share of health care costs onto their employees. In the past two years, for businesses with fewer than 200 workers, the percentage of employees enrolled in a plan with an annual deductible of $1,000 or more jumped from 16 percent in 2006 to 35 percent in 2008. See the chart below from the 2008 Kaiser HRET survey:

For the health care cognoscenti, the most puzzling moment of last night's debate was probably when John McCain said, "The average cost of a health care insurance plan in America today is $5,800."