23 March 2014

The Most Important Government Policy for Determining Unemployment Rate

In most EU countries, the majority of people report that their government makes it hard to start a business.  Sadly for them, this matter of ease in starting a business seems to be a simple determinant for unemployment. And it makes sense. The harder it is to start a business, the harder it will be for successful entrepreneurs to hire people.

Here you can see the relationship between how hard it is to start a business and the unemployment rate. Do you want a high unemployment rate in your country? Make it hard to start a business.

Obviously unemployment rates depend on a variety of factors, but governments sincere about lowering their unemployment rates would great a great return from making entrepreneurship easier. (I argue incessantly that the task for policy makers in this new economy is to popularize entrepreneurship just as successful policy makers popularized knowledge work in the Information Economy.)

If you want to stymie economic growth in an Industrial Economy, make it difficult to attract or create capital. If you want to stall growth in an Information Economy, make education expensive and unattainable for large swaths of people. And if you want to frustrate growth in an Entrepreneurial Economy, make it hard to aspiring entrepreneurs to start a business. It certainly seems to work for countries like Italy, Greece, and Spain.

Data for the above graph.

Hard to Start Biz Unemployment
 Italy 96% 20%
 Greece 93% 24%
 Spain 82% 25%
 Portugal 80% 16%
 Lithuania 72% 13%
 Latvia 71% 15%
 Slovenia 69% 9%
 Ireland 69% 15%
 Romania 68% 7%
 Slovakia 68% 14%
 Cyprus 67% 12%
Bulgaria 66% 12%
 France 66% 10%
 Czech Republic 61% 7%
 United Kingdom 59% 8%
 Belgium 58% 8%
 Croatia 57% 16%
 Denmark 54% 8%
 Poland 52% 10%
 Netherlands 49% 5%
 Hungary 48% 11%
 Finland 46% 8%
 Germany 46% 5%
 Estonia 44% 10%
 Austria 43% 4%
 Luxembourg 33% 5%
 Sweden 25% 8%
 Malta 21% 6%

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