Health Care and Entrepreneurial Spirit

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John Schmitt
The American Prospect, March 13, 2000

Free markets are supposed to have made the United States the world's most fertile ground for entrepreneurial activity. So how come only about 8 percent of Americans are self-employed, compared with much higher self-employment rates in countries alleged to suffer from "Eurosclerosis?" The United States, for example, trails Belgium (15 percent), France (11 percent), Germany (10 percent), Italy (24 percent), the Netherlands (11 percent), Spain (21 percent), Sweden (11 percent), and the United Kingdom (12 percent).

Are Europeans just naturally more entrepreneurial than we are? Possibly, but recent research by economist Alison Wellington, of the College of Wooster, suggests that the higher self-employment rates in Europe may be due to the continent's predilection for universal health care coverage.

Wellington has observed that, in the United States, spouses of workers with employer provided health insurance coverage were 7-14 percent more likely to be self-employed than were spouses of workers who didn't have work-related health benefits. Her estimates suggest that "universal spousal coverage" would raise the share of self-employed workers by about 7 percentage points--putting the United States right in the middle of the European range. "The lack of a (relatively) inexpensive source of health care would seem to be a deterrent to starting a business," says Wellington.