If incentives matter in encouraging or discouraging certain types of behavior, then incentivizing entrepreneurship seems to make sense as we battle economic woes.
That means lower marginal tax rates and consistent, limited regulation. The latest Bloomberg Businessweek also editorializes that the unemployment system could do a better job steering people toward entrepreneurial activity.
Current state and federal rules don’t allow unemployed workers to pursue self-employment aid right away; instead they must qualify for regular jobless benefits first, which takes weeks. States also worry that some startup dreams might fizzle quickly, wasting taxpayer money.
Making the entrepreneur’s path risk-free is impossible. Still, that shouldn’t stymie such aid. Three of the biggest states—California, Texas, and Florida—are home to 30 percent of America’s unemployed. These states don’t offer entrepreneurial assistance to the jobless; setting up such programs would be a big help.
Two other changes could help make entrepreneurship a likelier path back to work. First, states should tell the newly jobless about the self-employment option right away, rather than making them wait a month or two before becoming eligible. Second, minor income from a side business—capped at a reasonable level of, say, $750 a month—shouldn’t be automatically counted against jobless benefits. In some cases, this year’s hobby can be built into next year’s business.
