The Case for an Entrepreneurs Union

"It is well known that small firms are the engine room of the UK economy and the job creators in the country" Federation of Small Businesses Press Release July 23, 2010

Point 1: It is young businesses not small businesses that create the new jobs and increases in productivity that drive the growth of the economy.

For many years we have all believed that small businesses were "the engine room of the economy". A report recently published by the US National Bureau of Economic Research, showed that the size of a business, whether it is small or large, is irrelevant when it comes to creating new jobs. The study showed that it is the age of a business not its size that determines its importance in creating new wealth and new employment.ⁱ

In short, it is young companies that matter not small ones. And freshly started businesses make the most impact of all. In other words, it is the entrepreneurs that count.

As the New York Times commented about the study, "research published last month by three economists, working with more recent and detailed data sets than before, has found that once the age of the businesses is taken into account, there is no difference in the job-producing performance of small companies and big ones. "Size plays virtually no role," says John C. Haltiwanger, a co-author of the study and an economist at The University of Maryland. "It's all age — start-ups are where the job-creation action really occurs."ⁱⁱ

Equally, the report notes, it's the start-ups that generate the innovation that increases productivity, "It is important to not focus only on jobs per se but also on the role of [these young companies]...in the patterns of productivity and earnings... the volatility and apparent experimentation of young businesses ... is critical for the development of new products and processes..."ⁱⁱⁱ.

This was validated by the recent OECD report on Innovation Strategy; " the current economic downturn has led to reduced potential output growth, rising unemployment and soaring public debt... New and sustainable sources of growth must increasingly come from innovation-induced productivity growth. Innovation holds the key to boosting productivity."^iv

Once again, it is the entrepreneurs that matter.

Point 2: Entrepreneurs are a unique class of workers with a unique set of concerns distinct from the larger universe of small business owners and managers.

Established small business organisations will argue that there is no distinction to be drawn between a young business and a small business. But the concerns of an entrepreneur are distinct from those of an established business.

To quote the New York Times again, "For the small-business sector as a whole, individual income tax rates are an important issue ... Yet that is not the perspective of start-ups. Most young companies make precious little income during their first few years, and their leaders are focused on hitting it big, not on tax rates. In the 1970s, for example, when Bill Gates and Steve Jobs founded their companies, the top income tax rate was 70 percent."^v

As the report itself concludes, "This is not to deny the importance of ... more mature firms but to highlight that business start-ups and young firms are inherently different."^vi

Point 3: The solutions to the key issues that obstruct Entrepreneurs are distributed across governmental ministries.

There is no doubt that BIS is central to the government's efforts to support business. But the challenges that young businesses face frequently fall outside the scope of BIS. The Department of Work and Pensions, the Treasury, the Department of Communities and Local Government and HMRC in both it's roles, are potentially more able to encourage and enable young business creation and growth, than BIS itself.

Thus, any effort to develop initiatives that result in an increase in the creation of new innovation start-ups and increase their likelihood of survival will depend on a combined and coordinated effort that spans governmental departments. As the report chillingly predicts, "Policies that favour various simply defined classes of businesses (e.g., by size) and ignore this fundamental dynamic will likely have limited success."^vii

The recovery of the economy is the key challenge of this government. The recovery depends on the creation of new jobs and new companies whose innovations increase productivity. The potential solutions lie scattered across governmental departments. If there is to be any hope of success then this must be a priority of the entire government. Which means it must come from the top.

Point 4: No one represents the views of the single group of workers whose contribution to society will define the success of our recovery.

The current lobbying groups define their membership by size of business (E.g. the FSB) or by their role in the company (E.g. the IOD) or do not differentiate at all (E.g. The CBI). No agent can serve two masters. Entrepreneurs have no unique collective voice.

A Union of Entrepreneurs creates that collective: A single voice with a single purpose to strike at the heart of peril this nation faces and upon whom the hope of the nation must depend.

There is a case for an Entrepreneurs' Union.

The Entrepreneurs' Union

We propose a union of individuals, entrepreneurs and those who support our cause to come together. We ask only that you show your support by signing below. We will never ask for money or demand dues. Our intent is to demonstrate by our size that we must be heard.

We will ask the government's most senior ministers to meet in open forum to discuss the issues we present.

We will decide the issues on this site by open vote and debate.

We do not intend to be a union of dues and strikes but rather a union of individuals whose collective voice pierces through the special interests that cloud our government's priorities.

I encourage you to sign up using the form on the right hand side of this page and show your support. If we want a voice then we must unite.

Doug Richard
October 16th, 2010