Surprise! Welfare Actually Motivates People to Start Businesses

Surprise! Welfare Actually Motivates People to Start Businesses
By: care2.com
 
NEW DELHI - March 30, 2015 - PRLog -- How often do we hear welfare is for moochers, takers, people who will never contribute positively to the economy? While intuitively it might even make sense that people will be less likely to create their own job opportunities when they’re otherwise eligible to receive government money, the actual numbers don’t support this line of thought. In fact, multiple recent studies show that people are more likely to pursue entrepreneurship when welfare is available.

As The Atlantic reports, the key to boosting new businesses is providing people with a cushion to fall back on to if need be. For entrepreneurs, government assistance is not the ultimate goal, but rather a great backup plan in case things go wrong down the road. Many would-be business owners with innovative ideas and a drive to succeed have second thoughts about starting off on their own since they want a guarantee that they won’t be jeopardizing the ability to feed and house their families.

Let’s start with food stamps. Despite the long-held idea that food stamps are a recipe for laziness, researchers found that, when food stamp service was expanded, people who were newly eligible for food stamp were then 16 percent more likely to start their own businesses. In fact, most of the businesses owners never went on food stamps. Instead, knowing that they would qualify for assistance should their businesses fail seemed to be the motivation they needed to create jobs for themselves.

Government funded health insurance also had an impact on new businesses. American seniors are more likely to start a new business in the first years after qualifying for Medicare than in the years leading up to qualifying. Without having to worry about having an employer that provides insurance, older Americans can finally pursue their own economic dreams, despite being at the age of retirement.

Meanwhile, an even bigger distinction can be seen between families who barely qualify for the Children’s Health Insurance Program, and those with incomes that are just a little too high to qualify. Though slightly more economically disadvantaged, the families that qualified were subsequently 31 percent more likely to start their own business than those who did not qualify. Again, it looks like having a government safety net for their children inspired parents to take a chance on a new business opportunity.

In the United States, people starting a business aren’t allowed to collect unemployment benefits, but France has recently taken a different approach and reaped the rewards. The French government now continues to pay benefits as these long-term unemployed individuals get their businesses up and running. Thanks to providing that financial cushion, French people who qualified for unemployment were not 25 percent more likely to start a business than before.

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These are numbers we shouldn’t ignore when discussing government assistance moving forward. Clearly, welfare is more than just a handout; it actually functions as a motivator for people to pursue their American dream. If all it takes to inspire people to start their own companies is to say, “You’re eligible for some money if the business fails so you won’t be completely destitute,” how is that a bad thing?

Source: care2.com

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