When pundits typically refer to “entrepreneurs,” they’re not talking about Alesha and Chevelle, two wonderfully creative and industrious Caribbean immigrants who came to Pennsylvania with their mother and became citizens.
On the contrary, tales of U.S. entrepreneurs focus – “fixate” is a better term – on wildly successful celebrity billionaire-innovators like Bezos, Zuckerberg and Musk. I tell my law students that the broader dictionary definition of entrepreneur: “a person who starts a business and is willing to risk loss in order to make money”, is far more relevant to understanding the essence of modern entrepreneurship and the critical role of “microentrepreneuers,” including Alesha and Chevelle.
While working in a rural Pennsylvania prison, Alesha identified a new business opportunity: contracting with the state to meet an unmet need, transporting family members to visit inmates. Alesha and Chevelle developed a solid business plan, successfully raised startup funds from family and friends to lease a passenger van and went on to land the contract.
Their small business was positioned to support them and their families for years to come, and they’re not alone. For more than five years, we’ve assisted thousands of microentrepreneurs like Alesha and Chevelle, predominantly women and persons of color who generally employ only a handful of people. As a state and nation, we can and must do much more to assist these microentrepreneurs.
For context, entrepreneurs fall into two categories: innovation entrepreneurs and necessity entrepreneurs. Innovation entrepreneurs are the more flamboyant; they include the founders who reap the bodacious benefits of their inventions by buying yachts and flying to space as a hobby. Meanwhile, the necessity entrepreneurs are those that start neighborhood hair salons, ethnic food trucks and childcare centers. In states like Pennsylvania with relatively high unemployment largely due to industrial transition, there are vast numbers of microentrepreneurs who have decided to turn inward to support themselves and their families. Layoffs and fear of impending layoffs often trigger this life-altering decision.
Many observers are surprised to learn that entrepreneurship rises dramatically during economic recessions. But this uptick is driven by the necessity entrepreneurs. We have seen the number of new clients in 2020 (572) skyrocket 95% vs. 2019, and we are projecting another big increase for 2021 (over 900 new clients and a 57% increase).
Labor economists used to theorize that when unemployment rises in one area due to a plant closing or other event, people will move to another area where there are jobs. While that might be the case for a recent computer-science graduate, it’s not the same for lower-paid laborers due to a number of factors. For starters, people often have strong multi-generational family and community ties that a move would undermine.
Meanwhile, states, counties and local municipalities often trip over each other in their efforts to lure large companies with tax abatements, new infrastructure and other incentives. Rather than focusing primarily on this “race to the bottom” with giveaways, governments would be wise to balance their economic-development portfolios with the infusion and promotion of microentrepreneurship. Fact: More than 92% of all US businesses are micro businesses, and workers in micro businesses represent 31% of all private-sector US employment. The upside is unlimited economically, and can be even greater from a societal standpoint.