Wednesday, 19 February 2014

In Search of A Second Act....

The boomers and their encore careers are taking off, at speed.

When 45% of the US population will be over 50 next year (2015) and when this demographic consistently demonstrates the highest rate of successful (still in business after 5 years) and sustainable (as in “green”) entrepreneurial activities, it is not a fluke.
Before Washington shut down for the latest blast of Mother Nature’s interference, an exceptional joint senate hearing of the Small Business & Entrepreneurship/Aging Committees took place. Having considered all the expert witness testimony, Senators Nelson (R) ME and O’Neill (D) FL characterized the hearing as  "an eye opener" and "tremendous". 
Hopefully, this signifies progress. The Stanford Center on Poverty and Inequality recently reported that the long-term unemployment rate for men and for women is nearing the all time high for the period since 2000. Even since the Great Recession of 2008-9, the economy is still not delivering enough jobs and a full recovery is unlikely without major labor market reform and intervention. Encore entrepreneurship for seniors represents the way forward. The hearing was held with the following key participants and an SRO audience.

Federal Government representatives:
Senator Nelson (D) FL, chairman, Special Committee on Aging
Senator Collins (R) ME, Ranking Member, Special Committee on Aging
Senator Landrieu (D) LA, outgoing Chair, Small Business and Entrepreneurship committee
Senator Risch  (R) Idaho, Ranking Member Small Business and Entrepreneurship committee
Senator Scott (R) SC
Senator Casey (D) PA

Expert testimony by:
Tamika Montgomery, SBA (Small Business Administration) associate administrator
Kenneth Yancey, SCORE Association (Small Business Consultant) president
Conchy Bretos, CEO of MIA  Senior Living Solutions activist based in Miami
Elizabeth Isele, co- founder of SEW (Senior Entrepreneurship Works) and
Dr Greg O’Neill, Director of the National Academy on an Aging Society

In opening comments, the significant degree of misunderstanding surrounding senior entrepreneurship was confirmed. Senator Collins admitted that before getting involved with this issue, she had no idea that more older people were starting businesses than younger people. In fact, between 1996-2010, nearly 40% of new businesses were started by those aged 55-64, compared to 26% started by those 20-34.
Senator Landrieu (D) LA, outgoing committee chair, commented that the term “encore entrepreneur” is apt because the combination of being wiser, calmer and older allows seniors another chance to think, to dream and to build great businesses.  
As the baby boomers age and their numbers grow, it is therefore essential to create appropriate structures and facilitate senior entrepreneurship. This hearing sought to understand the barriers to senior entrepreneurship, in order to remove them.
Biggest impediments to expanding opportunities for senior entrepreneurship:

1.     Capital constraints
a. Tamika Montgomery, Small Business Administration Entrepreneurial Development associate  administrator reported that accessing capital is the biggest challenge.  Identifying where resources exist is not always straightforward. Seniors don’t know what is available. SBA volunteers are there to identify, guide and assist entrepreneurs to appropriate resources.
b.   Ken Yancey, SCORE is in partnership with the SBA. He said that less than 10% of SCORE clients were successful at getting bank financing. The majority self fund from savings. He emphasized he was not supporting borrowing from 401K’s or retirement savings to bootstrap entrepreneurship. He sees scope for micro lending for seniors.
c.   Conchy Bretos, MIA, indicated that typically seniors have insufficient revenue to secure loans. In her case, after a 2 ½ year process (with a bank supported by the SBA), she was forced use her house as collateral for a $100k loan.
d.   Elizabeth Isele, Senior Entrepreneurship Works, expanded on microloans as the way forward for seniors and starting out small. She identified agencies like Accion and Kiva as micro-lenders who help mitigate risks for senior entrepreneurs. She also used as an example of a strong player in the microloan market and as an example of a social media/online based resource. Isele emphasized that artisanal capital requirements for seniors are typically low, approximately 1K. As such, capitalizing senior entrepreneurs requires a small initiative that won’t take millions to get off the ground.
e.     Dr Greg O’Neill, NAAS, spoke of the banker paradox. While seniors hold the majority of their assets in banks, the banks don’t have an understanding of the needs of this population. He echoed Isele’s comments with respect to micro-lending and crowd-funding stating they must be made accessible to older adults and specifically target the long-term unemployed, where older people are disproportionately represented.

2.     Regulatory burdens, red tape and the existing tax code don’t lend themselves to succeeding and sustaining success for seniors. 
a.    Conchy Bretos, MIA, cites the silo mentality at the federal agency level, resulting in a lack of interagency cooperation. While the IRS and HUD both have capital programs, with subsidies and the HHS has Medicaid waivers, no national capital programs exist at the same time each state and agency has its own programs.  She used this scenario to explain how tax credit regulations work against getting a license for an assisted living facility: “The tax credit regulations state that you can’t force services onto someone living in assisted living but if certain services are not provided, they can take the license to operate away.”  The regulations are overwhelming and counterproductive and interfere with expediency.
b.   Elizabeth Isele, SEW, highlighted the fact that people over 60 only have a 6% chance of being reemployed. Meanwhile, these people have to wait 18 months, reporting that they have been unsuccessful at finding a job, before they can start receiving benefits. Isele proposed an alternative; whereby, unemployment benefit subsidies are given out earlier, provided they are earmarked for entrepreneurial education and training programs designed to help make the unemployed older person re-employable or able to start their own business.

Specific questions posed by Senators:

1.     Senator Casey asked: “What is one thing the House and Senate could do in the next year to foster better policy and bring about better opportunities for encore entrepreneurship?
a.     Dr O’Neill offered the following on encore entrepreneurship.  Approximately 1/3 of encore entrepreneurs come in to self-employment after 50, many of whom were “pushed” into entrepreneurship due to redundancy or scheduled retirement.  As such, they are very different from other 2/3’s who have spent their entire careers in self-employment. Echoing Isele’s proposal above, he believes that the encore entrepreneur can use unemployment benefits to help them get them back into the productive labor force and back into making contributions to the tax base, to social security and to Medicare.  O’Neill pointed out that the self-employed are shown to have longer work lives than salaried employees because they have a clear passion for their livelihood.
b.     Elizabeth Isele’s number one priority would be to change government attitudes toward seniors. She challenged the government to view seniors as assets not liabilities and to downplay all the rhetoric about how they have ring-fenced entitlements for seniors due to its negative connotations.
c.    Conchy Bretos, highlighted the need for better access to government and advocated changing policy, not necessarily introducing new legislation. She spoke of the White House Office of Social Innovation and Civic Participation, created under a mandate to identify human and financial capital to bring about community solutions. This is an organization which has been in place for five years, headed by a Mr Greenblatt but does not appear to have a phone number or answer email. This example illustrates the need for identifiable staff to connect senior entrepreneurs with federal government officials charged with coordinating the efforts of senior entrepreneurs.

2.     Senator Nelson asked, how does the Affordable Care Act impact senior entrepreneurs?
a.   Dr O’Neill highlighted the fact that the self-employment decision is inextricably tied to the phenomenon known as “job lock” or “job anchor”; when health insurance is tied to your workplace. Meanwhile, the risks of a health condition arising in the 55-64, high entrepreneurial group are greater as this group is more likely to have a pre-existing condition. Coincidentally, what stops people pursuing self-employment is the lack of health care outside of the workplace. He cited a recent survey by the Brookings Institution, which suggested that the introduction of the ACA could push some one million people into entrepreneurship. In addition, the age 64-65 transition has been researched extensively by the Kauffman Foundation. Their studies have shown that a big trigger for entrepreneurship is when Medicaid kicks in at 65, with an additional 13% of people moving into self-employment then. He concluded that while the overall net effects of ACA cannot be known yet, they could be substantial.

3.     Senator Nelson next asked what are the economic benefits of senior entrepreneurs?
a.     Dr O’Neill sees benefits as economic and social. Self employed individuals who enjoy what they are doing, stay in work longer and retire later and continue their contributions to tax revenues and social programs. Remaining in employment allows older people to increase their standards of living in retirement; particularly true for the long-term unemployed.
b.   Conchy Bretos added that older people have a greater social conscience and strong desires to help circumvent and solve social problems.
c.    Elizabeth Isele pointed to the fact that over 60% of the entrepreneurs she has worked with are involved in green business development.

4.   Senator Nelson then asked the panel to comment on the lump of labor fallacy, the mistaken belief that employing older people takes jobs away from younger people.
a.    Elizabeth Isele commented that senior entrepreneurship actually creates more jobs for young people when they get hired to help scale organizations. Additionally important, this also assists in expanding intergenerational connectivity opportunities because prosperity knows no age boundaries. Net effect, everyone benefits.

Take away’s:

1.    Senators Landrieu and Nelson are introducing a new bill empowering seniors via the Encore Entrepreneur Act S1454 before Landrieu steps down to join the subcommittee on Energy.
2.  The AEO, Association for Entrepreneur Opportunity has documented that if just one in three small businesses hired just one additional person, the unemployment rate in the US would be zero.
3.    Senate bill 208, SCORE Act for 2014, will strengthen resources for  entrepreneurs and improve services offered by SCORE volunteers to specifically include seniors.
4.     Senator Collins is working with Isele and O’Neill to craft new legislation to adapt unemployment insurance benefits for long-term unemployed seniors so they can use their unemployment benefits to explore entrepreneurship.
5.     Senator Collins was in agreement with Isele comment, “…we are not facing a silver tsunami, and we are looking at silver linings, that will yield golden dividends.” Collins plans to borrow the silver linings metaphor.

There is no room for confusion or doubt regarding the critical importance of senior entrepreneurship. Of course, there will be challenges but the advantages illuminated by this testimony are undeniable. The over 50 entrepreneur represents an untapped, unexplored, unsupported and key piston to the economic engine of the immediate future. Therefore, efforts to retool this enormous demographic and empower them to move past intimidation and fear to optimize their bonus decades makes physical, fiscal, psychological and economic sense. Meanwhile, the digital exclusion issue does remain relevant to this debate, particularly for those seniors who are intimidated or daunted by technology. In conjunction with debunking the lump of labor fallacy, perhaps the digital divide might be simultaneously addressed. Full employment across the life course and digital literacy both provide excellent opportunities for intergenerational connectivity.

In closing, in February 1970, the official report from the Senate Special Committee on Ageing opened with the following quote from the Honorable John E. Fogarty, House of Representatives. It was his opening address to a 1958 hearing, when he demanded that a conference on aging be set up. It took an additional three years but finally, in 1961, things got underway.
"In spite of the many surveys, books and conferences on aging, the greatest accomplishment to date has been the output of words."
In 50 years time, I hope that the results from the 12 February 2014 Senate hearing will not be viewed as another exercise in verbosity.
Deborah Gale

1 comment:

  1. You have illuminated a process that, to date, has been stationary/ immobile/ cemented in place (moving backward?). Being an early boomer who became an entrepreneur in 2000 (w/ an LLC that continues to this date), I look forward to the streamlining and authenticating of this process! The doubt and hesitation in the eyes of prospective bankers and accountants was squelched by my headstrong belief in myself followed by selection of a business attorney, a banker that did not blink, and an accountant who validated my business plan. By design or by chance, each of these professionals was female and had spent a number of successful years in her chosen field. I dream of a world in which a senior could access assistance to initiate a 'Second Act' with ease, dignity, and high hopes. As JFK once said, "Things do not happen. Things are made to happen!"