Entrepreneurship and Poverty in the United States.
Entrepreneurship is the foundation of success for the United States economy and has made this country the global leader in billionaires and trillion dollar businesses. These businesses, although criticized regularly by the media for not paying taxes, actually are extremely beneficial for the people and employment. With entrepreneurship comes amazing opportunities for the communities that surround them, with addition of jobs, better infrastructure, less poverty, and wealthy, more affluent neighborhoods. Looking at the relationship between entrepreneurship and poverty we can start to understand which states have business focused laws that attract entrepreneurs and in-turn reduce poverty.
To analyze entrepreneurship’s effect on the well-being of communities I utilized the Census Bureau’s API. Looking at the Current Population Survey (CPS) and the Small Area Income and Poverty Estimates (SAIPE) endpoints I gathered the total population of citizens in poverty by state. Additionally from the Annual Survey of Entrepreneurs (ASE) I gathered the total population of entrepreneurs by state. Using the state endpoint I found each state’s population and calculated Poverty per capita and Entrepreneurs per capita. From there I created a scatter plot showing the relationship between entrepreneurship and poverty.
The results of this chart were surprising, there is a -49% correlation between the state’s poverty and entrepreneurship rate’s, meaning as the number of entrepreneurs increases the rate of poverty decreases. Interestingly there’s a clear non-linear relationship with states on the extremes exhibiting high rates of either entrepreneurship or poverty. There could be many reasons a state has high or low rates of both entrepreneurship and poverty, one being the population, rent prices, laws, and politics. Knowing that there’s a clear correlation between poverty and entrepreneurship in states, let’s investigate the extremes and potentially what causes such drastic differences between states.
When looking at a state’s metrics it’s important to account for population, allowing the underlying trends to show. However for this visual I wanted to be able to see how population affects the two variables, so I encoded population to the size of the bubbles. This shows how smaller states are generally on the extremes of distribution. These states may have cultural and political environments that either breed poverty or entrepreneurship. Interestingly the larger state populations tend to fall somewhere in the middle. When looking at it from a population standpoint, you start to realize there are potentially other factors involved.
Politics is one factor people consider when moving to a state and can determine whether someone pulls the trigger on actually moving there. Most people consider the laws that politicians enact in each state, and could attract different people to that state. My theory is that the states with high entrepreneur rates tend to have laws and politics that attract entrepreneurs, while states with high poverty may attract the opposite. Infrastructure is also a major factor in moving to another state, so looking at the top states by infrastructure and comparing them to the top entrepreneurial states could give some insight into why entrepreneurs move to that state.
Looking at the political affiliation of the top entrepreneurial and least entrepreneurial states, we start to see a trend. States with high rates of entrepreneurship are overwhelmingly Republican, while poverty tends to be a mix but mostly Republican. I was expecting the Republican’s to dominate the entrepreneurial variable, but poverty was less expected. When thinking about the current state of the US, the common understanding is that Democratic states tend to have higher poverty and homelessness, while Republican states have more business and wealth. The reality is, poverty is a complex problem and politics is not the only factor that contributes to it.
According to debt.com, poverty is affected by a multitude of factors, including education, health, and location. With that in mind, dissecting the top 5 entrepreneurial states and the top 5 least entrepreneurial states by education and health could be a great way to analyze the reason for poverty in that state. The top five states by poverty are in order from most poor to least poor: Mississippi, Louisiana, New Mexico, West Virginia, and Kentucky. Washington D.C is technically the fourth on this list, but I will only focus on states, not districts. The top five states by entrepreneurship are in order from most entrepreneurial to least entrepreneurial: Wyoming, Montana, North Dakota, South Dakota, and Vermont.
While taking a look at the states with the highest entrepreneurship, I noticed that these states might be farming states. This would explain why these states are republican and in the Midwest. Also it’s interesting to note that four of the five states listed are neighboring states, and only further makes me believe these states have a large farming industry. Let’s dive deeper into the agriculture industry in both the entrepreneurial and impoverished states.
It’s important to consider other socioeconomic factors that could impact these states. For example, access to quality education and healthcare can significantly affect a population’s entrepreneurial capabilities and economic resilience. By analyzing data from the Census Bureau’s API, we can determine the quality of these services in both entrepreneurial and impoverished states. This analysis might show gaps or strengths that could be addressed.
Additionally, the role of infrastructure is really important as well. Good infrastructure, such as transportation, utilities, and digital connectivity, can enhance business operations and attract investments. Comparing the infrastructure quality in states with varying levels of entrepreneurship and poverty could highlight important trends and opportunities for policy intervention. Unsurprisingly, according to US News, the top five entrepreneurial states fall into the top 15 states in terms of infrastructure, while the states in poverty fall in the bottom 25%. This is not surprising given infrastructure is a vital part of quality of life and how well a state brings in new businesses.
When doing a specific case study on the top entrepreneurial state, Wyoming, you start to realize their local government breeds entrepreneurship. Researching the reasons why they have such high rates of entrepreneurship, I stumbled across Wyoming’s state government website. The website titled, Wyoming Innovation Partnership is the perfect resource for any entrepreneur in the state. Interestingly they also provide some fascinating statistics. According to wip.wyo.gov, 76.5% of Wyoming startups are still active after one year. This is a staggering statistic given that over 25% of startups fail after the first year.
Given that Wyoming provides state funded resources for breeding entrepreneurs, I’d like to explore Montana, North, and South Dakota’s resources on entrepreneurship. Montana has a different approach to entrepreneurship than Wyoming. Instead of the government providing services, the state government relies on the Universities to foster entrepreneurship, with the University of Montana providing an entrepreneurial degree program. Similarly to Wyoming and Montana, North and South Dakota provide both government programs and University programs that foster and teach entrepreneurship. These programs were designed by the state government to foster entrepreneurship, and based on the statistics it works. Incorporating these resources into states with high rates of poverty could be a great way to reduce the poverty rate and grow the US economy through entrepreneurship.
The United States breeds entrepreneurship through its business friendly laws and programs to foster ideas and innovation. Some states have extremely high rates of entrepreneurship, while some have extremely high rates of poverty. When looking at the states with high entrepreneurship you start to see the effort that goes into achieving such high rates of entrepreneurship. These states tend to have programs and Universities that are designed to help an entrepreneur grow and build their business. On the other hand, states with the highest level of poverty also have the lowest level of entrepreneurship. There are a variety of reasons that cause poverty, one factor being quality of life. One aspect of quality of life is the infrastructure that the state provides. Unsurprisingly, the states with the highest rates of entrepreneurship also have the best infrastructure according to US News, while the states with highest poverty fall well below average. Whether poverty and entrepreneurship caused the quality of life to increase or decrease, it’s important to note that there is a correlation between quality infrastructure and high rates of entrepreneurship. This could be caused by business investing in infrastructure, which is only more of a reason to start providing entrepreneurship resources in states with high rates of poverty.
Overall, exploring entrepreneurship and poverty has opened the door to more questions regarding poverty. The cause of poverty is difficult to quantify and there could be a whole host of reasons a state has high poverty. In further research I’d like to further explore the causes of poverty in these states and compare that to state’s with low poverty rates. In comparing and contrasting the high and low poverty states laws, regulations, norms we might be able to find the real cause of poverty and some potential solutions that other states have created. Unfortunately the United State’s wouldn’t be where it is today without entrepreneurship and poverty, which only furthers my curiosity on potential solutions to our class system.
