Study: Change Needed to 'Widen Road' Out of Poverty

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An IUPUI economist says regulatory obstacles are discouraging Indiana's poor from trying to use entrepreneurship as a tool to escape poverty. Doug Noonan says Hoosiers wanting to start a micro-business such as a food truck or a hair salon run into a "wall of regulations" such as licensing and permitting requirements. In a study covering 10-20 years of economic data in each of Indiana's 92 counties, Noonan says the state can help make market entry easier by streamlining regulations and increasing access to micro-lending programs. Noonan discussed the study on last weekend's edition of Inside INdiana Business Television.

December 4, 2014

News Release

INDIANAPOLIS, Ind. - Every county in the state of Indiana is experiencing growing rates of poverty, and the State's economy is ill-prepared to turn the tide, according to a new economic study released today in Indianapolis.

Dr. Doug Noonan, PhD., an IUPUI economist studied 10-20 years of economic data in each of Indiana's 92 counties. Noonan says that both intended and unintended regulatory, licensing and permitting obstacles discourage the poor from starting micro-businesses.

"If you want to operate a food truck in Marion County, for example, you immediately run up against a wall of regulations that do not apply to restaurants," said Noonan. "You have to obtain three or four government permits. Your hours of operation are restricted. And you have to give the government two pictures of each of your employees, and on and on."

Noonan's study- Poverty and Entrepreneurship in Indiana: Widening the Road Out of Poverty- concludes that Hoosiers also have almost no access to micro-lending, the type of small business lending that encourages first-time entrepreneurs to take the risk of starting a business.

"The direct impact of heavy regulation, and lack of access to small loans, is that we drive poor Hoosiers back on to safety net programs and force them to become part of an underground economy," said Noonan.

The study identifies a "new face of poverty" in Indiana that threatens the well-being of Hoosiers in every county. No county has improved over the past decade as it relates to poverty, and poverty rates vary greatly, from 4.7% in Hamilton County, to 24% in Monroe County. Marion County at 21% poverty is one of the four worst in the State. In fact, 32% of all children in Marion County live in poverty.

The solutions, according to Noonan, are not more tax breaks for big business. The answers lie in direct entrepreneurship, and the indirect impact of job creation by small entrepreneurs. Entrepreneurship offers an alternative way out of poverty, beyond safety net programs.

"Business formation, innovation, and easier entry to markets, all are followed by lower poverty rates," said Noonan.

Noonan's full study, and its executive summary can be accessed at http://pages.iu.edu/~noonand/Pathways.pdf.

Source: IUPUI