Entrepreneurship

In the developing world, microenterprise development has been widely recognized as a poverty-reduction tool, especially for women. Any business made up of five or fewer employees is a microenterprise. In the United States also, it is common for poor families to develop a microenterprise to raise extra income. As in the developing world, most U.S. microenterprises are operated by women, who need flexibility in balancing home and work responsibilities. ¹    

Renee Musser used to take pictures at her daughter's Girl Scout troop meetings. Some of the other mothers commented she was good enough to be a professional. One of them needed a photographer for a home event and asked Renee to photograph it. Six years later Renee was established as a wedding photographer and using it to supplement her income from other work. ²

Studies show that poor families often patch together a living from various sources of income, including a business set up to operate right out of their home. The burgeoning number of home daycare providers is a classic example. During the 1990s there was a tremendous expansion in the number of home daycare providers in poor communities. New laws required parents receiving welfare benefits to enter the workforce. Many of the people who created home daycare businesses had been on welfare themselves and knowing their market understood how best to serve their customers. Some of the most successful entrepreneurs graduated up from this to running much larger operations.

There are programs available through federal, state and local government and private sources to help low-income families develop skills to start and run a business of their own. These can also provide individuals with credit and ongoing financial education to improve their chances of succeeding at their business.

In a large-scale study of microenterprise development, researchers found that they raised average household income by more than 75 percent over two years—from $10,400 to $18,500. ³ Families have used income from microenterprises to save to buy a home, or pay to send a child to college, or invest back into the business. Even when the business fails or is abandoned for other reasons, the skills learned are transferable to wage jobs. The business skills in particular can accelerate one's advancement in the wage economy.

Entrepreneurs make communities stronger. Communities across the country, rural and urban, have felt the sting when large corporate employers shut down and move away, taking jobs with them. This is especially hard if that employer is one of the few providers of jobs in the community. Entrepreneurship is a form of sustainable development that can increase the assets of the entire community. The profits generated by local enterprises stay within the community and pass through other enterprises, leading to a multiplication effect that is good for all.

1. Center for Policy Alternatives, Microenterpise Development, Fact Sheet.
2. Renee's story appear in Bread for the World Institute's 2008 Hunger Report: Working Harder for Working Families.
3. Joyce Klein, Ilgar Alisultanov and Amy Kays Blair, Microenterprise as a Welfare to Work Study: Two Year Findings, Aspen Institute, 2003.