Here’s what states can do to boost entrepreneurship, economic output

Washington isn’t much help. Can local officials fill the void?


With the midterm elections right around the corner, Congress isn’t likely to make much headway on pending legislation in the coming months. (Jim Lo Scalzo/EPA)

Comprehensive tax reform? Going nowhere. Immigration reform? Off the table. Improvements to the health care law? Not likely. Not anytime soon.

With the midterm elections right around the corner and partisan gridlock mounting in the nation’s capital, entrepreneurs and business owners aren’t likely to see progress this year on proposals many of them have been lobbying for in Washington.

Maybe, then, it’s time to turn attention to a different set of policymakers.

“I can attest to the fact that a lot can get done at the state level and Washington can learn from states’ accomplishments,” John R. McKernan, president of the U.S. Chamber Foundation and former governor of Maine, wrote in a recent study released by the Chamber of Commerce on state-by-state economic growth initiatives.

In the study, researchers weighed a number of perceived best practices, including for example export assistance programs and investments in infrastructure, against each state’s recent economic growth determine which factors tend to produce the greatest returns. Based on the results, they outline a number of steps governors and state lawmakers could take to accelerate business growth and economic output.

Meanwhile, the Kauffman Foundation, an entrepreneurship advocacy and research group, released on the same day a vastly similar report identifying strategies state and local governments can take to boost business formation rates and stimulate economic growth.

Here’s a look at five of the top recommendations for state and local policymakers from the two reports.

Emphasize education

Many employers are struggling to find qualified job candidates, particularly in fields requiring expertise in science and mathematics — and it’s that widening skills gap that both Kauffman’s and the chamber’s experts believe state officials must address immediately.

“The growing disconnect between the skills employers need and the skills that are being produced in the labor market today causes workers and companies to miss out on realizing their full potential and, in turn, causes the economy to fall short of its potential,” researchers wrote in the chamber’s report, noting that states that have generated a strong talent pipeline consistently report greater economic success.

The chamber study urges states to bridge the communication and data gap that exists between colleges and private businesses so that schools better understand the type of talent employers are seeking but cannot find. It also recommends that officials work with business owners to develop effective and affordable skills training programs.

Explore exporting

Ninety-five percent of the world’s consumers live outside the United States — a statistic often cited by groups that favor more trade into and out of the United States.

In order to help their companies tap into potentially lucrative foreign markets, chamber researchers in their report urge state officials to provide international market assessments and business practice information about other countries, as well as fund export training programs that help firms establish an international growth plan.

Going one step further, they advise governors to consider organizing trade missions to help attract foreign buyers and investors.

Consider certifications

Nearly a third of American workers are required to have a licence to do their job, according to the Kauffman study. Occupational licensing, the authors wrote, thus “acts as a barrier to entrepreneurs seeking to bring new innovations and business models to market.”

They advise state officials to rethink their existing licensing rules and, where possible, consider less time-consuming certifications as an alternative.

Invite immigrants

A number of studies have found that immigrants are much more likely to start companies than native-born Americans. In fact, more than half of the nation’s top venture-backed firms were started by immigrants.

In the absence of an immigration reform deal in Washington, Kauffman’s researchers suggest that states can take the initiative to “create a welcome atmosphere” for immigrants and “embrace ethnic diversity” giving themselves a better shot at attracting foreign-born entrepreneurs who do make it into the United States.

Invest in infrastructure

In the chamber’s report, the authors note that federal funding for transportation and infrastructure projects is diminishing, “forcing states to adapt policy and to generate funds for improvements at the state level.” It’s a complex but important challenge for governors, they add, as transportation infrastructure is generally considered “a critical driver of state economic growth and prosperity.”

In order to promote business growth, the researchers recommend states invest in commercial broadband services and support sectors like data centers and energy suppliers. In addition, they warn governors not to skimp on funds for upgrading ports, airports and highway systems — all of which are vital to facilitate commerce and business growth.

Follow J.D. Harrison and On Small Business on Twitter.

J.D. Harrison covers startups, small business and entrepreneurship, with a focus on public policy, and he manages the Post's On Small Business blog.
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