Institutional hurdles to becoming an entrepreneur

I finally came to the decision to become an entrepreneur in spring 2018. I was a single mother who was suffering from unemployment for the first time in my life. I was part of an YT process that took place at the very end of 2014. The economy was not great and there were more unemployed, highly educated people than there had ever been before. While unemployment services were (and are still) targeted to people with a different background (I talk a little bit about this in another article written in 2016).

But I suffered greatly from the constant rejection of job applications (so many not even acknowledged as being received by the companies!). I also suffered from having very little variety and intellectual challenges in my life. It was eventually this last point that pushed me over the edge into entrepreneurship. I just couldn’t take being unemployed any longer. But it was an anxious time.

Hesitation

I had thought many times that I should put my skills to good use and go out on my own…but I was scared. As anyone who is not what might be called a “natural entrepreneur” can probably identify with. By the time I was seriously considering becoming an entrepreneur, I had exhausted myself trying to find employment. My income-based unemployment had ended and I was struggling on basic unemployment. This is hard to when you know that you are smart and have a lot to offer.

The real hesitation was about something so small in the big picture but so big in my little world. And this is something that I haven’t heard anyone else talk about…but it was a big hindrance to me. And it is basic mathematics.

As an unemployed person with 2 children to look after I was receiving the Basic unemployment benefits + a supplement for each child. The supplement is currently equal to about 19% increase in the daily amount (and I assume it was similar then). Which is a lot of money when you get so little. It came out to about €200/month.

The unemployment office, rightly or wrongly (this article is not here to determine this), encourages people in general but immigrants in particular, towards entrepreneurship. But they do not acknowledge the financial burden and uncertainty that this puts their clients in.

Support comes in Silos

The reason that I say this is because startup grant (starttiraha) is roughly equivalent to the basic unemployment daily rate (currently 34.50 and 35.72 per day respectively). Except, and this was the hurdle as a single mother (or any other single parent out there), there was no supplement for children. Which meant that as soon as I became an entrepreneur, my income would go down 20% (that extra one percent comes roughly as you can see that even the daily rate is lower for starttiraha).

These two, seemingly small amounts of money, might as well have been a huge mountain for me as a single mother. Putting this into context, 20% of single parent families are low income (three times the number of two-parent households). More than 80% of single parent families are headed by women. This means that women are disproportionally affected by this seemingly small reduction monthly income while being responsible for the health and well-being of dependents. In addition to this drop in income, I would soon need to start paying YEL.

In real terms, once I decided to become an entrepreneur, I would start each month with -€400 not even at €0.

Poverty traps?

But when we talk about the entrepreneurial spirit, these kinds of practicalities aren’t supposed to matter. These small amounts of money are not supposed to hold someone back. The system seems to think so as well, otherwise they would recognise that a single parent has mouths to feed whether she is on basic unemployment or on starttiraha. But it isn’t.

Suomi.fi states that “The start-up grant is discretionary support for a new entrepreneur. Its purpose is to secure a new entrepreneur’s livelihood at the starting phase of new full-time entrepreneurship when the income generated by the company is still low.” While NewCo states this same thing as: “The discretionary support is intended for the personal use of the entrepreneur and is not bound to any specific types of companies or branches.”

So, my question is, if this is meant as a grant to help the entrepreneur fund their person living (livelihood) expenses, why do they not recognise that children exist and cost money? Unemployment benefits understand this already and this is the same government. It is a prime example of the silos that exist in these services that provide services to the same people but they do not coordinate those services.

Lost unemployment access

In addition to this, becoming entrepreneurs give up their access to unemployment should their entrepreneurial endeavours not work out. How is this a responsible step when you are a single parent? Everyone knows the statistics about 1) how long it takes to make a business successful and 2) how many businesses fail in the first three years. There are so many rugs that can be pulled out from under a person in this position, that it is safer to NOT become an entrepreneur. This discrepancy needs to be fixed in order to give a more equitable launchpad from unemployed to entrepreneur.

There are three interesting European examples of how unemployment and starting entrepreneurial ventures can coexist and work together to support the new entrepreneur and take some of the anxiety and financial stress off them. These are from France, Germany, and Norway. Particularly the one in France was analysed and “they estimate that the change boosted the nation’s economy by €350 million per year, at a cost of only €100 million annually”.

So, with bold action and a creative approach, change is possible. Using a human-centred approach, it is possible to help the unemployed, help promote entrepreneurship, and to help the economy.

Pamela Spokes
Chair of the Migrant Entrepreneur Network’s Management Team