The United States is in the midst of the longest economic expansion on record. The U.S. economy has been growing for more than 10 years. The unemployment rate is near its lowest point ever.
And yet, poverty continues to be persistent nationwide. Tens of thousands of people are homeless in Los Angeles. The number of homeless people in San Jose, California, has climbed 42% in the past two years. Even in smaller cities with lower costs of living — from San Antonio and Columbus to Tampa and Charleston, West Virginia — many families are having difficulty making ends meet.
Alleviating poverty in these communities — and countless others — will require a locally tailored approach. But at the center of that approach should be public policies that make it easier for people to become entrepreneurs.
Encouraging entrepreneurship is one of the most important things policymakers can do to help those who are struggling economically increase their incomes and better provide for their families. Entrepreneurship is also key to helping legal immigrants from around the world, many of whom left difficult conditions in their home countries to search for a new life and more prosperous future in the United States.
Unfortunately, as new research from the Pacific Research Institute shows, government policy is restricting the economic freedom of low-income and immigrant entrepreneurs to start and grow new businesses.
One troubling statistic illustrates the problem. Small businesses with fewer than 50 workers pay nearly $12,000 per employee to comply with government regulations. That’s just wrong.
Ironically, many of these regulations are enacted in the name of benefiting workers. But expensive burdens like the $15 minimum wage, coupled with rising workers’ compensation costs in much of the country, make it much harder for low-income entrepreneurs and microbusinesses to create jobs and provide an economic boost for others facing tough times.
One government-mandated “barrier to opportunity” is out-of-control occupational licensing requirements. Justified by politicians as essential to protecting consumers, such requirements mandate that people spend incredible amounts of time and money before they’re legally allowed to work in their chosen field, start a new business, or develop the next big innovation.
In Connecticut, for example, those who wish to open their own barbershop must complete at least 1,000 hours of training before they can work. At eight hours a day, five days a week, that’s more than six months of training. These laws increase costs for both employees and the employers hiring workers who require occupational licensing. The public pays for them in the form of higher prices.
Reforming these laws to put more reasonable licensing requirements in place that correlate to the actual skills needed to perform a job will help more people find work and grow their incomes, while still protecting consumers.
But policymakers shouldn’t stop there. They also should consider right-sizing federal banking regulations. Doing so could make it easier for start-ups to obtain credit and capital from microlenders and community banks, where they typically go for their initial funding.
The tax code also desperately needs attention. Reducing the tax burden on entrepreneurs and allowing for more savings in tax-free retirement and health care accounts would do wonders to help people get new businesses off the ground.
An effective solution to America’s nagging poverty problem has eluded our nation’s leaders for generations, despite trillions of dollars in government spending. More of the same will not help those struggling to make ends meet climb the economic ladder.
If politicians are serious about reducing poverty, they’ll work to eliminate the barriers to entrepreneurship they’ve put in place — barriers that make it far too difficult for millions to achieve the American dream.