Entrepreneurship and Poverty in US 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 wellbeing 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.
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.
In further analyses it would be interesting to look directly at the laws or cultures that could potentially be affecting poverty and entrepreneurship in states. In terms of entrepreneurship, politics and population definitely are determining factors in whether entrepreneurs move to a state. On the other hand, population does seem to have some effect on poverty; Where states with disproportionately high entrepreneurial and impoverished residents tend to have very small populations. The politics of a state however doesn’t strongly predict the extremes.
At the end of the day, three categories of states emerged from the data. The extremes in poverty, the extremes in entrepreneurship, and the average. Republicans tend to be more extreme in poverty and entrepreneurship, while democrats seem to be moderate in nature. Determining the reason behind this trend in poverty and entrepreneurship by state will require a more in depth analysis of state laws, politics, and metrics. Overall however, high rates of entrepreneurship in states do correlate highly with rates of poverty.
