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Connecticut lands on the “naughty list” for startup activity and isn’t nice to entrepreneurs

This time of year, children are told that Santa Claus is making a list and checking it twice to find out who has been naughty or nice. However, Santa isn’t the only one who makes a list every year. Leading experts and organizations across the country also rank states by their public policy. In this ongoing series, we will see which “naughty” lists Connecticut landed on and make small suggestions to help the state be a little “nicer.” Check back every day from now until Christmas for a new entry!

In recent years, Connecticut has not been friendly to business or entrepreneurship, particularly start-up activity. In fact, in a new survey of small businesses conducted by the Connecticut Business & Industry Association, more than nine in 10 small businesses indicated that public policy did not “facilitate the efforts of small businesses in the state.” Given this climate, it is no wonder the state does so poorly in 50-state rankings.

Another “naughty list” Connecticut made this year is the Kauffman Index of Startup Activity. Connecticut performed second-worst in New England and only outperformed 10 states nationwide. The state also fell two rankings relative to last year’s results.

The Missouri-based Kauffman Foundation focuses on education and entrepreneurship to foster a culture of self-sufficient, engaged citizens. Its Index of Startup Activity examines the rates of entry of new entrepreneurs, whether those individuals were previously employed, and the market share startups have relative to established businesses.

While Connecticut lands on the naughty list for startup activity, a state like Montana represents its polar opposite. This is partially because the state does not erect unnecessary barriers to competition like occupational licensing, which hits solo entrepreneurs particularly hard. Only two states are less obstructive to low-income workers overall than Montana, which significantly outperforms Connecticut. In fact, Montana is so nice to workers that it licenses ten fewer such occupations than Connecticut.

Entrepreneurship is the lifeblood of capitalism. Affording people and businesses the freedom to identify and fulfill opportunities in the market is how consumers get better deals, investors make returns, and often how workers get good-paying jobs. Incidentally, all of that activity is also taxed in the state of Connecticut, and while the purpose of commerce is not to provide government with revenue, it would still behoove the state to encourage it a little more.

So, while the state is making news for being unable to get its fiscal house in order, that fiscal instability has an impact on the business climate. As the state feels the need to chase revenue through endless taxes and fees, pressure is exerted on people who just want to work hard and earn a living.

One simple and easy path to increasing startup activity in Connecticut is to conduct a thorough review of all licensing laws and eliminating licenses that serve to erect barriers of entry rather than protecting the consumer. Waiting to Work, written by Dr. Mark Gius and released by the Yankee Institute could serve as an ideal primer for policymakers unfamiliar with the restrictive nature of licensing.

Be nice: eliminate all licensing requirements that also exist in fewer than nine other states, and consider greatly reducing fees, education, and exam requirements of applicants. With tools like Yelp at consumers’ fingertips, reliable information about businesses is more readily available than ever before. Reducing licensing requirements would not harm consumers and only benefit job seekers and entrepreneurs.

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