In 2009, Jeffrey Erb left his management position at a premier New York City design firm to branch out and start his own business, Jeffrey Erb Landscape Design, which creates artful urban landscapes and garden designs. Though Jeffrey plans to hire and expand his young business in the future, current economic conditions necessitate that he remain a "one man shop."
Jeffrey's situation is becoming increasingly common. The layoffs of the Great Recession have prompted more and more people to set off on their own, trying their hand at running a business. New data from the Kauffman Index of Entrepreneurial Activity indicate that startup activity rose to record highs in 2008 and 2009. And, in 2010, business formation remained at these elevated levels, with an average of 565,000 new businesses formed every month -- a 15-year high.
In one sense, this should be comforting: In a time of adversity, thousands of Americans decided to take their future into their own hands. On the face of it, entrepreneurship is part of our safety net. A closer look at the data, however, reveals a more disturbing story: The apparent increase in entrepreneurial activity during the past three years was due almost entirely to businesses like Jeffrey's that aren't adding employment beyond the founder. The creation of employer firms, in fact, has been on the wane.
This wave of "jobless entrepreneurship" has profound implications for the economy. New firms have historically been responsible for a disproportionate share of net new job creation in the United States. Yet, over the last few years, as business creation increased, job creation from new businesses fell. The U.S. economy is running on the "Red Queen" treadmill -- creating more new businesses but failing to keep pace in terms of new jobs. For an economy struggling to maintain a rate of job creation that merely keeps pace with population growth, this is a problem.
The job creation picture grows more worrisome as we dig into the demographics of recent entrepreneurial activity. Those most likely to strike out on their own during the recession were men in their 50s; individuals with high school educations; and those starting construction businesses. While the female rate rose only slightly, the male entrepreneurial rate took a big leap from 2007 to 2010. On a monthly basis, nearly 25 percent more men are starting businesses per month than before the recession, and the gap between men and women is as wide as it has ever been.
Likewise, startup activity rose the most among older age groups, particularly people in their 50s and 60s. As with gender, the gap between the rate of business formation among middle-aged Americans and those ages 20 to 34 has never been this wide. More concerning, however, is the education skew. Among college graduates, entrepreneurial activity rose only slightly during the recession, for those with less than a high school education, the rate skyrocketed last year. The magnitude of increase is important here: Americans with the lowest educational achievement drove the recessionary rise in entrepreneurship. And, construction not only continued to enjoy the highest rate of business formation but also experienced the largest increase during the recession.
Entrepreneurial bright spots persist: Silicon Valley and Boulder are abuzz with the newest wave of technology startups. But for millions of Americans, the entrepreneurial calculus has changed. What, if anything, can be done?
For various reasons, entrepreneurship has stalled among certain sectors of America. As noted, business creation among those ages 20 to 34 was significantly lower in 2010 than older age groups. Yet from 1996 to 2010, the youngest cohort persistently had the lowest rate of entrepreneurial activity -- this despite the absolute explosion of entrepreneurship programs on campuses, for example. High schools, universities, and community colleges must do a far better job of preparing potential entrepreneurs. As it stands, lessons in business-plan writing substitute for experiential learning, which is far more effective in teaching entrepreneurship.
Likewise, entrepreneurship among native-born Americans has been mainly flat for 15 years, while it has risen considerably among immigrants since 2006. Immigrant entrepreneurs have been an undeniably important source of innovation and new jobs in the United States for two centuries, and measures to further attract the world's best and brightest, such as the so-called Startup Visa now pending in Congress, are essential. But it seems that something must be done with regard to native-born Americans. Conventional tools such as taxes and regulations could be tweaked, but why would these elicit different responses in immigrants and the native-born? Much more research must be done on this issue.
Debates over entrepreneurship policy often revolve around the same issues: taxes are too high; regulation is too heavy; credit is too constrained. These standbys obscure the demographic gaps in entrepreneurial activity that continue to open across America and that cannot be explained away by such simple references. If the United States wants more entrepreneurs -- and it desperately needs them for job creation and innovation -- it needs to better understand the phenomenon of entrepreneurship.
Follow Dane Stangler on Twitter: www.twitter.com/KauffmanFDN
Brink Lindsey: Why Economic Growth Is Getting Harder -- And What To Do About It
The 'Jobless Entrepreneurship' Recovery - Portfolio.com
The era of 'jobless entrepreneurship' - Central Valley Business Times
The first is an initiative aimed at minimizing the impact of weeks long blackouts that NASA and the NOAA suggest are highly probable on at least 4 occasions during the next decade from solar flare emissions. 130 million Americans are estimated by NASA to be at risk. New York, Washington D.C., and most of the Eastern half of the nation as well as Seattle and Portland, Oregon are shown on a NASA map as in danger of a power grid collapse. See Green Light at www.aesopinstitute.org for the map and the potential to minimize the impact.
The second is A New, New Deal, on the same site. It uses proven financial instruments to move the economy forward and would broaden the ownership of wealth in a manner acceptable to almost everyone.
Finally, a Human Investment Tax Credit program is designed to create up to 6 million jobs and help 4 million small firms. A weak version of these incentives was tested in the Jobs Tax Credit program in 1977 and generated 2 million jobs the following year. An update is on the same website.
Rising oil prices are an obvious threat. See Moving Beyond Oil and Black Swans on the same Aesop site for a few revolutionary breakthroughs that might cause oil prices to fall.
All of these are difficult, but certainly possible, paths to a much healthier economy.
is right for you an you better have thick skin and you better know how to do your job an any ones job you ever thought of hiring better then they do becuse in the beginning you will be doing all of the jobs yourself
and it will be hard an take all i mean all of your time.finding customers is not hard finding repeat coustomers
thats hard but go for both i found that when i get a PO for ten bucks thats bad but i found at the end of the year its good it really adds up to a lot of money but here is how i did it i bought a turn key Co used it toget my Co up and running using the small profits and befor you know it i sell the turn key and i run the bis
i wanted to always start any way. with the turn key i had someone run it and i worked full time and let the profits grow to the point i could start my bis in 18 mo mean time i went out an set up coustomers for the new co and in 36 mo i work one job and make a vary good living. plan well think of everything of you will fail
of running a good bis and i see all of the things that go rong and go right day to day i think i will stay a one man OP not becuse i like to work alone i don't it is hard and takes all of my time so be it if i do hire
as i was told a long time ago its more what do i mean by more. more taxes more paper work and so much more other things even if working alone is hard it is better then if i hire 3 guys
and after my 17 year old son sees what i have to do just to stay in bis he told me dad i think i will
just go for a pay check going in to bis is a bunch of cpa.....p that is sad a 17 year old can see that so clearly.
Low wages and low hours.
I don't call mine a "business". I help kids from Kindergarten to college do school projects and in season I can make a reasonable amount of money but not enough to live on.
And if I could expand, how do I train someone to do what I do? I know it because I have been a designer and model builder for more than thirty years. Finding someone to put up with my sliding-scale fees would be hard enough. (That's why I don't make alot of money! My goal was really to help kids. If they can't afford me we work around it.)
I salute those who are trying to make a go of it in "Great Depression Pt. 2" on their own.
As far as jobs, that is going to take wringing the money out of the Banksters and major business expansion is going to be the only way to create them. With Obama's kid-glove approach to his friends in the financial sector, don't hold your breath. This Depression is going to get worse until we get a new president and congress.
Hopefully the next president will be a Democrat. (A real Democrat, as opposed to the Herbert Hoover Clone we have.)
One Party, The American Party, has said; rebuild, retool and educate. Those actions will put Americans to work.
small businesses are often funded but our savings and anyother money we can get our hands on, often the are a last ditch effort have little planning and no hope of ever getting a businees loan so to think small businesses will creat jobs by hiring other people is totally unreal.
Paul Robeson - Old Man River
http://www.youtube.com/watch?v=iEQEeNhtosg&feature=related
Wow. It's also true that most new businesses fail within five years. What's that sayin about all the jobs created by new business? When they were making jobs, they didn't last. Do we need to stop being rugged individualists, like our society says, and do we need to band together and have unions and try to gain some sort of economic power? No? Okay, slog, slog, beg, beg, die die
And, as a small business owner myself, I won't be able to hire until my middle-class clientele does better economically. Its the dirty little secret the GOP avoids at all costs.
Small businesses will continue to fail at a higher rate so all we have left is big corporations and little competition.
So all the small to medium businesses will be unable to compete, which is where we are now it appears. If we let this trend continue, we could all be unemployed or simply workers, not having the opportunity to become an owner/manager ourselves.
By doing this they are effectively gagging the public and continuing their plundering of countries and their resources.