Policies to Encourage Self- Employment for Low-Income Persons: Modest Goals and Supportive Linkages
Four policies for expanding low-income peoples' participation in selfemployment activity are considered: do nothing, remove government impediments, develop programs, and create supportive institutions. One could choose any one of the four alone as a self-employment policy, or choose some combination. 1 This chapter discusses the first three selfemployment policies. Creating supportive institutions is presented as a continuation of the policy discussion in the next chapter. Three themes run throughout many of these policies: goals should be modest to ensure attainment, clients should be linked to supports that can ensure success, and focus should be on people at the very bottom of the income distribution.
We know from Chapter 3, that low-income people do engage in selfemployment activity on their own. Perhaps there is a natural rate of self-employment for low-income people and any interference, no matter what the intentions, will cause economic harm to them. Three situations come to mind where interventionist efforts to actively expand self-employment activity of low-income people may harm them: overcrowding, ignoring the side benefits of informal capital acquisition, and inadequate substitution for transfer payments.
Assisting a large number of persons to start small businesses in a particular sector increases the supply of goods and services in that sector and may depress prices. This is good for the consumer but the