Social entrepreneurship is the most crucial type of entrepreneurship, as it is startup companies that develop ideas and solutions to current social, cultural, and environmental issues, such as climate change. Unfortunately, entrepreneurship has been on the decline. According to the INC, “entrepreneurs have been in decline for 40 years due to fear of financial failure.” Furthermore, the Office of Advocacy explains that around one in twelve small businesses is doomed to close a year, most commonly due to low sales and restricted cash flow. To resolve the fear of failure and stimulate small businesses, a Universal Basic Income (UBI) of $1,000 a month should be implemented. Luckily, a UBI has the potential to stimulate entrepreneurship further and give businesses the push they need to start, and provide a safety net for companies.
The largest concern of most small business startups is the lack of funding and spending ability. According to an NSBA study, more than 25% of small business owners say they aren’t able to obtain the funds they need to operate their business. Not only are legal fees expensive, but branding and web hosting sites are as well. According to Sammi Carmella, a writer for Business News Daily, average costs for a micro-business average around $3,000. The Journal of Small Business and Entrepreneurship quantifies that many small businesses were forced to finance through personal savings and credit cards. They explain, “over 80% of US entrepreneurs utilized personal sources of funding, accounting for 57% of all startup financing acquired during this period.”
Additionally, a UBI would provide a sense of security for entrepreneurs. Blakeman explains that one of the major reasons for the decline in startups is the fear of failure. Fortunately, the Smith School of Business elaborates that a UBI eliminates one of a small businesses’ largest fears, a fear of failure. With a safety net to fall back on in times of need, it would provide entrepreneurs with the confidence necessary to continue social innovation and new product development. This is crucial for those who have less financial spending power to create a startup business, as it would alleviate the fear of failure.
What does this mean in the long run for entrepreneurs and small business owners?
The NSDMC explains that around 50% of businesses in the US are owned by minorities. Furthermore, these minority-owned businesses pay close to $50 billion in tax revenue to the government. If these businesses don’t have the spending power to take risks and continue their startup, it could have devastating effects on the economy.
Problematically, the USSC stated, “minority-owned firms are two to three times more likely to be denied credit, more likely to avoid applying for loans based on the belief that they will be turned down, and more likely to receive smaller loans and pay higher interest rates on the loans that they do receive.” This means that minority-owned businesses are less likely to have enough money to continue to grow their businesses without a UBI. The impact this has on the economy is enormous, because approximately 50% of the US GDP growth is because of increases in innovation. With no money for startups, to create businesses, and innovate, the US GDP is in trouble.
However, a UBI is proven to work. Per QuantumRun, in some places where UBI was implemented, there was a 301 percent rise in entrepreneurship. There is data to show that for every 1 percentage point increase in the rate of entrepreneurship in a state, there is a 2 percent decline in the poverty rate.
Therefore, with an increase in innovation, business, and an economic boost, a Universal Basic Income would result in an increase in the labor force. The Big Experience estimates over 4.6 million new estimated jobs would be created, through new business ventures.