Promoting small businesses is the key to rejuvenating our still-struggling economy, argues Karen Mills, a senior fellow with the Harvard Business School.
Small businesses create two out three new jobs, but three problems — the startup gap, the skills gap and the capital gap — are holding them back, Mills, a former Small Business Administration administrator, writes in an article for
Fortune magazine.
The United States is creating fewer startups, both in fewer new high-tech firms as well fewer mom-and-pop businesses like local restaurants and auto shops.
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To close that startup gap, we must form "ecosystems that foster entrepreneurship similar to what we see in Silicon Valley," Mills argues. Local governments, education and communities should work together to create innovation clusters, manufacturing hubs and startup clusters.
"This is not a question of government getting out of the way. Government needs to step up its game — and so does business."
The skills gap can be solved by businesses working with educational systems, she notes. Colleges and other institutions are trying to tackle the problem but most plan their curriculum years in advance. They may not train people by the time companies want workers with certain skills.
"Businesses need to put as much priority on their supply chain for human capital as they do on other parts of their materials supply chain," Mills suggests, urging businesses to partner with local universities and community colleges, define their job needs and help build training and apprenticeship programs.
Lack of capital is also a problem, she adds. Banks find small business lending costly and risky, especially when lending small amounts. "But it is these lower dollar loans that actually are most important to startups and small businesses in the communities hardest hit by the Great Recession."
Technology may provide an answer as entrepreneurs create online marketplaces and big data helps analyze creditworthiness. Banks and credit card companies should join the act, and federal and state governments can help by creating guarantee programs.
Gone are the days when job creation just meant tax incentives for big businesses, Mills asserts. "That's not the formula for today. The growth challenges are different, and the opportunities are actually greater."
Commentators generally agree that startups and small businesses create jobs but they offer varying ideas on how to help them. John Arensmeyer, founder and CEO of the Small Business Majority, an organization of small businesses, says increasing the minimum wage would help small businesses help giving low-income consumers more spending money.
A
survey of small business owners shows that 57 percent support raising the minimum wage, he writes in a guest blog post for the philanthropic collaborative
Living Cities.
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