3/7/2011 7:52:55 AM
This morning we released the 2010 Kauffman Index of Entrepreneurial Activity
. The Kauffman Index is a rather unique measure of entrepreneurship as it relies on a quirky design of the U.S. Current Population Survey to come up with a monthly measure of the number of households transitioning into entrepreneurship from other labor force statuses.
Since we are working from a household survey, the Kauffman Index has the advantage of being able to give very detailed demographic information about who is becoming an entrepreneur. Indeed, it's from this perspective that these current year findings arise:
- The immigrant rate of entrepreneurial activity increased substantially – from 0.51 percent in 2009 to 0.62 percent in 2010 – and declined slightly for the native-born. This increase expanded the large positive gap that already existed between immigrant and native-born entrepreneurial activity rates.
- A growing immigrant population and rising entrepreneurship rate contributed to a rise in the share of new entrepreneurs that are immigrant, from 13.4 percent in 1996 to 29.5 percent in 2010.
- Entrepreneurial activity increased slightly for men and decreased slightly for women. For men, the entrepreneurial activity rate increased from 0.43 percent in 2009 to 0.44 percent in 2010. The female entrepreneurship rate decreased from 0.25 percent to 0.24 percent.
- The African-American entrepreneurial activity rate decreased from 0.27 percent in 2009 to 0.24 percent in 2010. The white entrepreneurial activity rate decreased from 0.33 percent to 0.31 percent.
- The entrepreneurship index was highest among the least-educated group, moving from 0.49 percent in 2009 to 0.59 percent in 2010, suggesting an increased number of people entering entrepreneurship out of necessity. The largest decrease in entrepreneurial activity occurred for high school graduates.
On Data Maven, I wanted to specifically point out two new features of this year's report. First, and most importantly, is the expansion of the report to utilize the Business Employment Dynamics (BED) series data from the Bureau of Labor Statistics. One of the limitations of the CPS as a data source is that we are not able to disaggregate the type of businesses whose start is captured in the Kauffman Index. Thus, the Kauffman Index captures both transitions to self-employment as well as the start of larger businesses. In an attempt to add more depth of understanding to the current state of entrepreneurship in the United States, an aggregate measure of new employer establishment starts was computed this year from the BED. The resulting picture, shown below, gives a much more accurate national picture, in my view:
Taking the Kauffman Index and BED-based measures both into account gives the picture of an economy with the highest number of people becoming entrepreneurs on a monthly basis but most of them only going into self-employment or starting lower employment-potential businesses.
The second change that I wanted to highlight this year was something which I originally wrote about last year in a blog post
- a look at the changing look of entrepreneurs, in the aggregate. This takes into account both the proclivity to become an entrepreneur (the Kauffman Index) and also the changing demographic composition of the U.S. to look at changing total numbers of new entrepreneurs. For three categories in particular, this measure is quite telling.