November 2, 2011 Forum

Self-Employment – a Strategy for Adding Jobs

During this time of high unemployment, research shows that Americans increasingly are turning to self-employment, a shift that deserves support from the local to the national level, according to the speaker at Georgia Tech’s third fall-semester innovation forum on November 2, 2011.

Anil Rupasingha, a research economist with the Federal Reserve Bank Atlanta (FRBA), said the nation is currently 6.8 million jobs below where it was when the recession began, and adding to that 4.8 million jobs the country should have gained produces an 11.1 million job shortfall.  Self-employment has surged over the last decade and it will continue to do so, he said.  Citing an August 2011 issue of Business Week, he observed that 31 percent of the U.S. labor force is self-employed, and according to the federal Bureau of Labor statistics, by 2019 the self-employed will account for 40 percent of all U.S. workers.

Rural counties have higher rates of self-employment than do their urban counterparts, according to Rupasingha, adding that his research using county-level data “found a statistically significant relationship between self-employment and county economic performance measures” (e.g., growth in income and employment).  The results, he indicated, “provide empirical support for the pro-small business prescription to accelerate local economic and employment growth and reduce county-wide poverty.”

He suggested several policy and practice opportunities: (1) more technical assistance and better credit access to boost productivity, (2) access to general business services, (3) programs that stimulate a community’s entrepreneurial culture, (4) assistance with health care and taxation issues, and (5) further research on what the self-employed need to succeed.  The U.S. Department of Labor, he said, has a voluntary program to encourage the unemployed to start businesses wherein states pay a self-employed allowance instead of regular unemployment insurance benefits, which participants can receive weekly while starting their enterprises.  Seven states have such programs, he added, but none in the Southeast.

The November session differed from the usual format.  During the presentation, FRBA’s Karen Leone De Nie broke in occasionally to survey attendees, asking questions such as area they cover (e.g., metro, state, rural, urban), occupation (e.g., planner, economic developer, researcher), employment conditions, barriers to employment (e.g., no jobs, mismatch of skills, drug abuse).   Attendees clicked an appropriate multiple-choice answer on hand-held devices and the percentages quickly appeared on screens behind the podium. It was part of FRBA’s effort to collect information about workforce development and chronic unemployment issues.

The Innovations in Economic Development Forum is presented each semester by Georgia Tech’s program in Science, Technology and Information Policy (STIP), a joint initiative of the university’s Enterprise Innovation Institute and School of Public Policy.  Free and open to the public, it brings together faculty, researchers, students, economic developers, and policymakers to discuss leading-edge ideas and practices in economic development and innovation policy.  For upcoming forums and videos and presentations from past forums go to the STIP website at stip.gatech.edu.