Wednesday, 18 June 2014

Red states, blue states and small business owners

In the United States, a small business is a defined as an independent business with fewer than 500 employees. Small businesses account for more than 99% of all businesses, and about 49% of total private sector employment. There are approximately 28.2 million small businesses in the country, compared to just 18,000 large businesses.

Each year since 2012, Thumbtack (in conjunction with the Kauffman Foundation) has surveyed more than 12,000 small business owners across the U.S. Results from the 2014 survey were released a few days ago. The Thumbtack sample appears to be reasonably representative, though it does oversample service sector businesses (as opposed to those in the agriculture and manufacturing sectors), new businesses (those that have been around for less than 2 years), and very small businesses (those with fewer than 5 employees). Overall, the survey comprises around 20 questions pertaining to the ease of doing business in the particular respondent's state.

There are four main questions. First, "In general, how would you rate your state's support of small business owners?" Second, "How difficult or easy do you think it is to start a business where you live?" Third, "How much does it cost to hire a new employee in addition to their salary?" And fourth, "How friendly or unfriendly is your state or local government with regard to business regulations generally? Thumbtack has aggregated the responses to each question at the state level, and produced heat maps documenting spatial variation in the perceived ease of doing business. The maps corresponding to the four preceding questions are all highly similar.

The map below corresponds to the first question for the year 2012. Interpretation is as follows: the more orange the state, the higher the perceived friendliness to small businesses; the bluer the state, the lower the perceived friendliness to small businesses; grey states were not surveyed. What is striking, though perhaps not surprising, is how closely this map matches the heat map of party vote shares, which is reproduced beneath it. Here, the redder the state, the higher the average margin of victory for the Republican candidate over the 5 presidential elections between 1992-2008; the bluer the state, the higher the average margin of victory for the Democratic candidate.

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