Millennials Can’t Keep up With Boomer Entrepreneurs
This post is the seventh in a series by the Growthology team, where we will take a look at some of the topics discussed in State of the Field, a compilation of knowledge on entrepreneurship research written by the leading experts in the field.
It’s well documented here at Growthology that we think entrepreneurship is closely connected to economic growth, innovation, and job creation. Consequently, it’s important to understand the factors that can estimate the likelihood of a person starting a business. Age is one of them. The connection between age and propensity to start a business is not yet widely studied, but of key importance in understanding entrepreneurship behavior.
America is aging
The oldest cohort of Baby Boomers turned 65 in 2011, and the last cohort of Boomers will turn 65 in 2029. With a lower fertility rate for Americans after the Boomers, this means the general age structure of the United States is shifting older. The historical population pyramid is becoming more of a rectangle as you can see in the interactive graphic from Census Bureau below.
Research on age and entrepreneurship
Overall, an aging America has the effect of lowering the working age population as a percent of the overall population as Boomers retire. I’ve written previously about work by Karahan, Pugsley, and Sahin that indicates that fewer workers means fewer startups.
Most of the research on age and entrepreneurship focuses on two key age groups: millennials and baby boomers. In addition to the obvious difference in their current age, there are some surprising differences in entrepreneurship between these two groups.
Millennials: reality doesn’t match the myth
Millennials are not yet at the peak age for starting a business. The oldest millennials are just a few years away from entering the peak age for entrepreneurship, which despite pop culture perceptions is closer to 40 than 20. The Atlantic recently reported on the myth of the millennial entrepreneur. In part, this helps explain why the most recent Kauffman Index of Startup Activity showed the age 20-34 demographic group (0.22 percent) so much below the rate for other age groups. (This rate means that 221 out of every 100,000 adults in this age group became entrepreneurs in a given month.) It’s also worth noting that the rate of new entrepreneurs for the age 20-34 group is down from the high point for this age group of 0.28 percent in 1996.
Millennials are not at peak age for starting businesses, but they are still starting businesses at lower rates than other cohorts did when they were the same age. There is still much debate about the reasons. Some possible examples include student debt, timing of entry to workforce with the Great Recession, change in risk-taking attitudes, housing costs, among others. A poll by Young Invincibles found that Millennials identified student debt and lack of retirement savings as barriers to entrepreneurship, but some higher-education experts aren’t convinced of the student debt connection.
Boomer entrepreneurship is, well, booming
Entrepreneurship among Boomers is strong when compared to younger age groups. The Kauffman Startup Index reveals that the rate of new entrepreneurs ages 55-64 has increased from 0.34 percent in 1996 to 0.37 percent in 2014. (This rate means that 370 out of every 100,000 adults in this age group became entrepreneurs in a given month.)
There are competing views among whether success or hardship is behind the growth of entrepreneurship for older Americans. On one hand, working and starting business late in life might be a result of increased debt levels especially for younger female Boomers. On the other hand, some researchers have found that growth of Boomer entrepreneurship may be an indication of financial strengths rather than weaknesses.
We invite you to learn more about how age affects entrepreneurship by visiting this section on Kauffman’s State of the Field site and looking back at our 2015 State of Entrepreneurship.
Learn more about age and entrepreneurship rates from the Kauffman Startup Index entrepreneurial demographics interactive.
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