Editor’s note: This post was republished with permission from the Ewing Marion Kauffman Foundation’s Growthology blog.
In talking about entrepreneurship, the talk is often about what is left to be done.
Lower this tax rate.
Remove that regulation.
Organize this kind of incubator.
With this focus, it may appear that entrepreneurship faces a daunting and unending uphill battle. A policymaker, hearing all of needs of the entrepreneurship community, may struggle to know where to start.
The Kauffman Foundation has published a number of policy digests, aiming to get policymakers up to speed on the issues that matter to entrepreneurs. There isn’t one path. There isn’t a checklist for cities, states, or the entire country to follow to fix barriers to entrepreneurship one by one.
Effective entrepreneurial policy exists throughout the different realms policy touches. Often, these policies aren’t specific to entrepreneurship. Shaping the economic landscape to be more open to growth by, for example, creating more fluid labor markets and a better educated population, has the potential to lead to entrepreneurial gains that targeted entrepreneurship policy can’t reach.
So what states are making progress and shaping effective and conducive entrepreneurship policy?
Embedded in the nature of entrepreneurship is competition. New entrants see an opportunity, an opening, and chance and believe that they can do it better, or faster, or in new markets. Without an equitable playing field, the risk/reward calculus of entrepreneurship is out of whack, and new firms are preemptively disadvantaged.
One way policy has institutionalized this drop in competition is directly through the growing use of non-compete agreements. Non-compete agreements restrict opportunities for employees to join other rival firms or start their own business, shutting down opportunities for entrepreneurship from the type of individuals who are most likely to have expertise.
This spring, the Utah House of Representatives realized the danger excessive non-compete usage poses and acted. The legislature passed and the governor signed legislation that limited the allowable scope, duration, and geographic boundaries of those contracts.
Approximately a quarter of all jobs in the U.S. require a license; some, I would argue, have no real justifiable use for licensing. For those securing a license, this can result in a number of exams, educational requirements, hundreds of dollars in fees, and other barriers that fence out a number of potential practitioners. And these licenses have spread to a number of industries that have no real justifiable use for licensing.
Until this year, Ohioan salon managers were required to be licensed before they could supervise a salon. However, the Ohio removed the obligation for salon managers to be regulated by the state. This kind of deregulation recognizes the costs that occupational licensing produces (higher prices, fewer service providers, less opportunities for economic independence) and allows entrepreneurs to freely compete.
Cities are developing effective entrepreneurship policy as well. Sign up to receive the latest Growthology blogs as I will be discussing that topic next. If you know of a place that is on the right track with its policy to support entrepreneurs, let me know in the comments below or reach out to me on Twitter @chrisjack_son.
Chris Jackson is a research assistant in Research and Policy for the Ewing Marion Kauffman Foundation, assisting in the understanding of what policies and environments best promote entrepreneurship and education in the pursuit of economic growth.
Find Jackson on Twitter: @chrisjack_son.