Part of the answer may lie in sputtering start-up stats . . .
I’ve been in Washington, DC, the last couple of days representing NAWBO at a health care summit hosted by the National Women’s Business Council. Leaders from women’s business groups met with policy experts, medical professionals, insurance providers, and representatives from the Obama administration to share insights on current challenges and policies surrounding health care reform.
During one period of open dialog, the immediate past chair of NAWBO referenced a recent Wall Street Journal article that reported on the downslide in start-up numbers during the current recession and its implications for job growth.
If you missed the article, here are some of the highlights:
- Between 1993 and 2008, businesses 90 days or less old accounted for 14 percent of new hires.
- Business starts fell 14 percent from the third quarter of 2007 to the third quarter of 2008.
- The number of businesses launched in third quarter 2008 was the fewest since 1995.
- When startup activity picked up in fourth quarter 2008, it created the fewest number of jobs since 1993.
The article offered several reasons for the downturn, including many that we’ve heard about over and over again during the last year: lack of access to bank funding, decreased venture capital activity, an increased risk aversion, inability to tap into home equity, etc.
All of these certainly play a role. But there’s another that’s not getting much attention from the media, although I’m hearing it from other sources: no access to affordable health insurance.
I told the group at the summit that health care used to be a competitive issue for small businesses; it was largely an employee attraction and retention problem. But now it’s actually become a barrier to business ownership. Some would-be entrepreneurs are choosing to stay in their corporate jobs, even under the threat of layoffs, because they can’t afford to buy health insurance for themselves or potential employees if they were to strike out on their own. In the face of tight credit markets and the other challenges of today’s economy, some folks just can’t carry the added risk that comes with no health insurance coverage and are stifling their entrepreneurial ambitions and, by extension, the creation of any new jobs their companies may have created.
So, I guess in a way, health care is still an “attraction” problem for small businesses. It’s just expanded. Now, it’s become a problem of attracting entrepreneurs, not just good employees.