Entrepreneurship has surged during Covid, Minnesota can capitalize on this trend
If the pandemic has proven anything, it is that necessity is indeed the mother of invention. Likely due to the massive layoffs that have characterized the pandemic, there has been a rise in entrepreneurship, especially among laid-off workers. s
According to the Wallstreet Journal,
To adapt to the pandemic and the job loss it unleashed, more Americans are becoming their own bosses, setting up tiny businesses to work as traveling hair stylists, in-home personal trainers, boutique mask designers and chefs. A man in Maryland started a mobile car-washing business.
Many new entrepreneurs previously worked at salons, gyms and restaurants, in the kind of face-to-face jobs erased when state orders closed swaths of the economy in the spring. The economy has since mounted a split recovery, with some Americans thriving while many others continue to struggle. A cohort of the laid-off, stuck on the descending arm of that recovery, are using their ingenuity to get off it.
According to data from the Bureau of Labor Statistics (BLS), self-employment recovered faster than payroll employment during the period between February and October.
Startups are critical to the Minnesota economy
New and young businesses are crucial to growth. That has been the case for Minnesota. As explained by the commissioner of the Minnesota Department of Employment and Economic Development (DEED) Steve Grove in the Star Tribune,
Small businesses account for a whopping 47% of the jobs in the state — a trend that’s mirrored nationally. What’s more, new businesses are responsible for nearly all net new jobs and 20% of gross job creation in our economy, according to a study published by MIT.
Minnesota however has a poor track record in creating businesses. As Grove continued,
According to data from the U.S. Labor Department, Minnesota ranked 48th in the rate of new entrepreneurs per capita in 2019 — and has only exceeded the national average for four years of the last 20. We also rank low on start-ups that lead to early job creation, coming in 40th last year.
Fortunately, however, new businesses that are created in Minnesota tend to survive at a higher rate compared to those created in other parts of the nation. In 2019, Minnesota ranked fourth in the country for the proportion of new businesses that survived past five years.
Increasing the rate of business formation, therefore, could improve economic growth, especially given Minnesota’s high business survival rate. For that to happen, however, some changes need to take place. Minnesota needs to become a more friendlier state for entrepreneurs.
Make Minnesota business-friendly
Currently, Minnesota has some of the country’s highest income tax rates which are deterrent to business creation. Restrictive laws like occupational licensing also prevent people from entering certain industries and building businesses and, therefore, need to be repealed. So do minimum wage laws and other numerous restrictive rules.
The coronavirus-induced shutdown has delivered a big blow to Minnesota’s economy. Capitalizing on growing entrepreneurship by making Minnesota more business-friendly could deliver a way to recover lost jobs and businesses.