A friend of mine who first met me in college always laughs her ass off when she sees me with my kids. She is not laughing because I have long and in-depth discussions with my son as to why Team Umizoomi is better than Wonder Pets (it is all about the Umi-Car being so much cooler than the Fly Boat), or how freely I give out amazingly curative boo-boo kisses. She does not laugh when I put on a pretty princess tiara with my daughter. She does not laugh (too much at least) as I become the jungle gym for an entire horde of pre-schoolers.
She laughs because she knew me when I lived my life with minimal regard to my health or safety. I joked that the best advice on surviving a pedestrian-auto accidents was the same advice given to Victorian virgins on their wedding nights — get the knees up and relax — and then proved that advice several times. I barely looked where I was going in the world when I had nothing to drink, and was completely, and loudly, oblivious when I had more than two beers in me. I had minimal regard to my safety and the medical history to prove it.
That changed dramatically when I had kids. Some of the change was an ongoing process of being an idiot at twenty-one, and far less of an idiot as I aged, but my daughter’s birth meant I had to be responsible for her which meant I needed to be in good shape to take care of her. My son’s birth just delayed the moment of my first bungee jump a few more years.
I became far less risk seeking, and far less risk tolerant since I’ve become a dad. I can’t afford a stupid and preventable injury, incapacitation or death. I can’t afford to walk into my bosses’ office and tell them to take a flying leap off a tall bridge as my next best alternative to regular employment (refereeing way too much and finding a job in a field where I have not burned too many bridges) no longer is good enough. I can’t afford to chase a 1 in 50 chance of striking it big when there is a 1 in 2 chance of penury. I can’t even conceptualize betting everything on black. I don’t think this risk aversion behavioral change is uncommon for parents. We become risk averse and minimize maximum regret decision makers to some extent if the initial conditions are good enough for our kids. Starting a new business is risky as hell, and if failure (which is highly probable) means the kids get screwed, then quite a few potentially good ideas will never get beyond the “hmmm, this is interesting” stage.
The Harvard Business Review looks at some research on how health insurance expansion increases economic risk taking:
So does the extension of publicly provisioned health insurance prompt more people to start companies? That’s the question asked by a paper released earlier this year by Gareth Olds of Harvard Business School.
Olds analyzed Census data from before and after the passage of the Children’s Health Insurance Program in the U.S. in 1997 to assess its impact on entrepreneurship. CHIP, or SCHIP as it was previously known, provides publicly funded health insurance to children whose families don’t qualify for Medicare, but whose incomes still fall below a cutoff (typically around 200% of the federal poverty line)…. The rate of ownership of incorporated businesses — a better proxy for sustainable, growth entrepreneurship — increased even more dramatically, from 4.3% to 5.8%, an increase of 31%.
What about all the other factors that might skew this sort of analysis? Olds used several quasi-experimental statistical methods in his research to control for such variables. The basic intuition behind his methods is that a family just above the CHIP cutoff isn’t all that different from a family just below it. Whether you make 199% of the poverty line or 201% doesn’t matter for much, except whether or not you’ll be able to enroll in the program. With that in mind, his methods zero in on this sub-group, in order to confirm that the policy actually caused the increase in firm creation.
The mechanism by which Olds believes CHIP boosts entrepreneurship is relatively straightforward: it reduces the risk of “consumption shocks,” i.e. the possibility of having to pay out a large chunk of cash unexpectedly for a child’s illness. Lower the risk and more people start companies.
I would rephrase it somewhat differently. CHIP made sure that the kids would not be hurt too much by taking a risk and failing at it. They could still get their vaccines, they could get their broken legs repaired correctly instead of cheaply, and if they were diagnosed with cancer, care would be available at great facilities without it being dependent on bake sales and 5K fundraisers. If I can do something risky while isolating the downside effects from my kids, I am far more likely to do that activity than if the downside risk was also splashing on my kids.
This is common sense. We, as a society, should want rational risk taking behavior on new ideas to be encouraged, not held back because the kids could get screwed.
srv
Any numbers on business incorporation rates since ACA passed?
Violet
Health insurance handcuffs have been a thing for a long time. No surprise to see entrepreneurship increasing.
Ruckus
Another great post.
There is risk all around us, how much of it we can mitigate if not outright control is pretty substantial. Getting sick, a kid breaking a bone, cancer? These are fairly uncontrollable and need not be a life sentence of poverty and hardship above trauma of the event itself.
Starting a business is risky, I know this all too well from first hand experience. If I had been in a relationship there would have been a discussion about maybe but if I had had young kids there never would have been a thought of attempting it.
aimai
The reality is that if children are uninsured and get sick its going to destroy the family, whether the family itself is at financial risk through entrepreneurial choices or not. I get where you are coming from and this is an interesting post but CHIP and other forms of health care coverage for kids are mostly important, to me, because it helps families choose to see a medical professional before something spirals out of control. Its in all our interests as a society to see that kids’ health needs are met promptly and prophylactically rather than left to the last minute.
? Martin
The primary reason I work where I do is that Ms Martin has pre-existing conditions, and my prior life at tech startups was not compatible with providing reliable healthcare should she stop working. And following that our daughter also carries the pre-existing conditions label.
I’d have stayed out there and/or struck out on my own if not for that. Almost 20 years in and it’s unlikely I’ll leave now. I’m getting old and that pension is getting valuable.
wmd
I’ve made a similar point using my personal experience.
In 2001 I saw that Infiniband enabled remote shared memory could be used in clusters of PCs to make a virtual NUMA Symmetric Multiprocessor machine. I could have brought engineering talent together to do this – at the time I was working as an engineer at Sun.
My domestic partner’s son had a brain tumor diagnosed in 2001. Sun allowed me to cover her and her dependents on my group health plan.
It was easy to stay an employee and not try to found a company – my step-son would die, company may or may not make it.
ScaleMP went on to make SMPs using Infiniband. While they didn’t die a quick death, they’re something of a solution in search of a problem, as the need for large SMPs has dropped, and the other advantage of a large memory space is solved by modern small server’s having large memory capacities.
Dog On Porch
Great points, interesting angle. If indeed “the business of America is business”, that which serves to encourage initiative should be recognized as being good for the country. Democratic party speechwriters would be wise to take note.
boatboy_srq
@Dog On Porch: More to the point, this directly addresses issues that affect the small-business entrepreneurs the Teahad likes to fool into thinking they’re the “Job Creators™” the Teahad claims to support. Pointing this out should be part of the Dems’ talking points from here to November and beyond.
catclub
@Dog On Porch:
The last thing any business will ask for is more, and more nimble, competition. Ask the cab companies what they think of government regulations that cut down the chances of Uber succeeding.
JoyfulA
In the 90s and early 00s, I was on multiple lists for publishing freelancers. Many, many listmates felt forced to take jobs they liked less and that paid less because a spouse lost a job and the family’s health insurance or a family member became uninsurable at affordable rates. Two individuals I know of moved to Pennsylvania because of the Blues’ community rating.
I said over and over, if only we had some sort of national health insurance scheme that would enable self-employed people to remain that way—
Villago Delenda Est
Well, we should, but if these people succeed, then the 1% will be discomfited, and corporations will be threatened with competition, and WE CAN’T HAVE THAT!
Which is why tumbrels are looking more and more like the way to go.
pseudonymous in nc
@Dog On Porch:
Well, surely selling muffins for $5 to pay 0.005% of someone’s medical bills is American entrepreneurship at its finest.
I think we’re starting to see a clearer picture of what happens in late, piecemeal reform — doors potentially open for people who were job-locked, doors potentially close for people who get shifted to lower hours or from full-time employment into contract work.
That’s better for people who are “comfortable but nervous”, whose income is sufficient to pay the mortgage but not enough to deal with a health crisis without insurance. For the moment, it’s not as good for people who were already screwed by the cost of healthcare and insurance, and may now get screwed on their weekly hours as well by employers wanting to avoid insuring them. (Having Medicaid in place more broadly would help there, so fuck you very much, Chief Justice Roberts.)
JustRuss
Funny how rigid adherence to economic ideology can make our champions-of-small-business capitalists blind to the glaringly obvious. I look forward to Harvard Business Review’s take on income inequality and the minimum wage.
Nutella
This is why other countries have higher rates of small business formation than the US does. In most European countries you can quit your job and try something new without affecting your or your family’s health care at all. So more of them do it.
JaneE
Twice in the last three years, I have been to literal “bake sales” along with other varieties of fund raising efforts for the families of children with leukemia. Word of mouth advertising and community compassion are keeping two families going. In other countries, this would be unthinkable.
Gvg
individual companies don’t want to hear it, but companies and industries have natural lifespans. for some decades now, we have not kept up on replacement population of companies and industries. it’s hurting us in job growth. other factors are not enforcing anti monopoly laws and overpaying ceo’s and underpaying regular wage workers. funny though, I learned all that in business school. they teach it, but somehow not many people seem to remember it after the test is over and we here a lot of criticism about b schools not teaching these things.
Lymie
If Vermont can pull off single payer, THAT will be a great experiment/proof of the point of the OP.