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New Businesses Are the Key to Build Back Better

We have a rare opportunity at hand. With the passage of the $1.2 trillion bipartisan infrastructure deal and upcoming Build Back Better social spending bill, communities have a chance to think beyond the funding needed for short-term relief and truly “rebuild” the American economy. Yet this will require more than physical infrastructure projects, as we must also strengthen our human capital infrastructure.

Perhaps the biggest issue facing America is economic insecurity and the wealth and income gaps across race, gender, and geography. While redistributive measures may help in the short term, we need to focus more on creating a prepared workforce and making entrepreneurship a national policy priority beyond Entrepreneurship Month in November. 

Healthy entrepreneurship ecosystems lead to wealth creation, job growth, and overall healthy communities. Even though our economy and our news headlines seem to be dominated by booming Silicon Valley tech-based startups on the road to IPO and unicorn status, we currently don’t have enough of them, especially those started by female entrepreneurs and founders of color. 

New businesses both large and small bring new ideas and efficiencies to the market and lead to job creation. At the Kauffman Foundation, where I serve as CEO, our research has found that, on average, companies older than 10 years cut about as many jobs as they add, which explains why areas that rely on older, existing industries are constantly struggling. Nearly all net job growth — meaning more jobs added than lost — comes from younger companies in the startup or early growth phases.

Yet, per capita rates of new business starts in the U.S. have been declining or flatlining for 40 years. The uptick in 2020 is partially due to people starting businesses out of necessity stemming from job loss during the pandemic. Digging deeper into statistics, we can find that the entrepreneurship gap is greatest for certain demographics. Geographically, we find a lag in business formation among people living in many parts of the Heartland — the country’s middle — as well as in small towns and rural areas. The same holds true for entrepreneurs of color. By gender, women lag men in both per capita startup rates and the size to which their startups grow. 

The best way to accomplish equity in entrepreneurship and wealth generation is by breaking down historic barriers that keep underserved communities around the country, from Midwestern small towns and rural areas to neighborhoods in our major cities, from starting and sustaining a business. In response, a coalition of nearly 200 organizations have banded together to create the policy prescriptions needed to open access to opportunity, funding, knowledge, and support necessary to grow new companies. 

In addition to supporting entrepreneurship, employers — not just the CEO, but the HR department as well — need to adapt hiring practices that prioritize equity and look for credentials and skills, not just four-year degrees. To help our short-term job crunch and support new businesses looking for talent, we need more investments in accessible programs that help adults get reskilled or upskilled with in-demand credentials for growing sectors, like the ones we see through community colleges and workforce training centers across the country. The job market is changing and we need to prepare our workforce to adapt with it.   

Longer-term, we need to rethink our education system. A recent survey showed all students across the country would benefit more from learning “essential” skills like communication, problem-solving, and financial literacy as well as having access to internships and projects with employers over preparing students for standardized tests. These programs help provide the essential skills and experiences people need to succeed after high school, whether that’s going into a four-year university, getting a credential, starting a business, or getting a job. This focus on real-world learning must be better incorporated into our high schools and middle schools if we want to encourage students to embrace 21st-century career paths.

Now is the time for policymakers and employers to address the needs of potential entrepreneurs and our workforce, particularly from underserved communities and the middle of the country, to close the wealth/income gaps. We have a chance to turn a fractured, fragmented nation into a unified society and develop an economy that fires on all cylinders and works for everyone. Let’s seize this opportunity.

The opinions expressed here by Inc.com columnists are their own, not those of Inc.com.

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