Investing in DIY economy — it’s a win-win
I believe a rising tide should lift all boats, not just the yachts. At no time is this more relevant than around the holiday season, when a spotlight shines on the gap between the haves and have nots.
California is home to 111 billionaires, the most of any state; yet it also suffers the highest poverty rate in the country and a disproportionate number of welfare recipients.
Our traditional economic development policies have contributed to the widening wealth gap, and are expensive. Take business attraction, a favorite.
Nevada spent $1 billion in incentives to lure Tesla and create 6,500 jobs — shy of $154,000 per job, a fairly typical cost. California should be thrilled that we saved the money.
For six years, American Express has encouraged the country to ‘Shop Small’ on the Saturday after Thanksgiving. We need to do more than promote a day of local shopping. For a more inclusive, sustainable and stronger California economy, leaders should invest in the strategies that ensure success of small, local businesses.
That means supporting business coaching, access to capital, and connections to markets for all businesses, especially those in lower income communities – what I call the DIY Economy solution.
Recent studies have found that microbusiness ownership is a key strategy to reducing the wealth gap and creating wealth. Imagine that the state invests half of the Tesla incentives in local businesses assistance.
At a cost of $5,000 a business, that would create 50,000 business owners like Liliana Tomona and Miguel Shimabuku, owners of Temazcal Family Clinic in Fremont. The clinic offers high quality health care that understands cultural and language preferences.
Temazcal Family Clinic is one of 3.5 million very small businesses that create jobs and wealth in California.
Tomona took business planning classes at the Renaissance Entrepreneurship Center. She said, “We were amazed with ideas that our teacher gave us. She helped us stay encouraged and develop our business. As a result we opened Temazcal Family Clinic with amazing results.”
The businesses come in all forms, from artisan retailers to electronic repair shops to environmental consulting firms to small manufacturers to mobile app developers. Some will grow, but 99 percent will stay small. These businesses become economically more important as the labor market shifts.
“By 2020, roughly 50 percent of the private workforce will have spent time as independent workers at some point in their work lives.”
In California these very small businesses created a net 920,000 jobs from 2003 to 2012 while large firms (more than 500 employees) lost 200,000 jobs. With the right support, the 920,000 could be two or three times that. We would have a stronger labor market and a stronger economy.
When businesses receive business coaching and training, 80 percent will be in business in 3 to 5 years, and will create two jobs in addition to the owner. Business assistance is also the first step in the capital access process for most businesses that do not qualify for traditional bank loans. And small businesses need access to market opportunities.
Local and state governments should invest in these resources, help businesses succeed on technology platforms that create access to customers, and support maker spaces such as shared commercial kitchens.
Shop small for the holiday season, but also focus on what works to build wealth and equity. Investing in a DIY economy is a win-win strategy. California will create vibrant, self-reliant, sustainable local economies, have shared prosperity and help all boats rise, not just the yachts.