In the new issue of the Washington Monthly, Matt Connolly looks at the Millennial generation and tries to figure out why they are starting fewer businesses than previous generations. As he points out, it’s a problem because cars, airplanes, air conditioners and computers were not invented by established companies but by entrepreneurs. If we want to maximize job production in this country, we need to incentivize people to start companies. Most of them will employ relatively few people, but some of them will strike gold.
It’s also somewhat of a curious problem.
There may not be a generation in American history with more entrepreneurial potential than Millennials. They tend to be more highly educated, independent, and open to change than their older counterparts. They report strong interest in starting businesses, have the most access to entrepreneurship training, and came of age at a time when successful entrepreneurs were ubiquitous in news and popular culture. In an economy in need of a jumpstart, it’s a match made in heaven.
It’s a match made in heaven, maybe, but isn’t being translated into reality.
Millennials “have created fewer and fewer businesses since they entered the workforce in the early 2000s,” says a report from the Kauffman Foundation. Americans ages twenty to thirty-four are starting businesses at a slower rate than previous generations were when they were in the same age group. Business creation by Americans of all ages peaked at more than 550,000 startups in 2006, according to Kauffman, before dropping 31 percent to a low in 2010. That number only crept back up past 400,000 in 2012.
Connolly argues that in addition to some obvious causes like comparatively low savings and capital for investment, some Millennials are channelling their entrepreneurial spirit into the sharing economy (selling wares on eBay or becoming a driver for Uber) rather than doing things that will create jobs for other people, too.
Doing this kind of self-driven temporary work could be helping Millennials prepare for real business creation as the economy improves and they start to hit their forties. Or it could be keeping them from more standard work environments, robbing them of the experience necessary to identify niches and build contacts. Only time will tell whether Millennials are poised to break or doomed to perpetuate the country’s downward entrepreneurship trajectory.
It’s a new and difficult world for Millennials, and I think that their votes are up for grabs. Which party is going to find policies that will address their realities? I’ll be looking for that in the upcoming election.
Make sure to read the whole thing.