ON-Lion Letter

According to a February report from the Goldwater Institute in Phoenix, states with lower barriers to entry into occupations have higher rates of entrepreneurship among low-income workers -- and entrepreneurship is the path out of poverty for many entrepreneurs.

All states regulate at least some occupations by requiring licenses or certifications from the government before you can legally do business.  The greater those requirements and the more occupations that are regulated, the lower the rate of entrepreneurship is among low-income workers, finds Bootstraps Tangled in Red Tape:  How State Occupational Licensing Hinders Low-Income Entrepreneurship.

"There's no better way to lift people out of poverty than to give them the freedom and opportunity to start their own businesses," said Stephen Slivinski, a senior research fellow at the Center for the Study of Economic Liberty at Arizona State University and author of the Goldwater report.  "And the best way to give people that opportunity it to limit the government red-tape that keeps people from pursuing a job or business."

Slivinski's study examines what low-income entrepreneurs look like demographically and how low-income entrepreneurs are affected by the occupational licensing burdens that fall most heavily on them.  It also ranks every state by their rate of low-income entrepreneurship.

The average low-income entrepreneurship rate is higher than the national average, at 380 entrepreneurs per 100,000 low-income residents.  Yet, some states have a higher rate than average and some have a lower rate.  To explain that difference, the study matches data from the Ewing Marion Kauffman Foundation and the Institute for Justice (IJ) for the first time ever and discovers the higher the rate of licensure of low-income occupations, the lower the rate of low-income entrepreneurship. 

The states that license more than 50% of the low-income occupations had an average entrepreneurship rate 11% lower than the average for all states.  The states that licensed less than a third had an average entrepreneurship rate that was about 11% higher.

Colorado, Vermont, and New Mexico have the highest rates of low-income entrepreneurship in the country, while Kentucky, Wisconsin, and Mississippi have the lowest.

The Lynde and Harry Bradley Foundation in Milwaukee substantially supports both the Goldwater Institute and IJ.

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