A recent story in The Wall Street Journal by Ruth Simon and Caelainn Barr had a provocative headline, calling young American entrepreneurs an “endangered species.”
The idea of youthful entrepreneurs diminishing in numbers conflicts with the portrayal of entrepreneurship in popular culture and the media as booming in college dorm rooms, with young adults dressed in hoodies, not suit and tie. But the data give reason for the Journal’s declaration and should cause policymakers to pause and reflect on the implications.
Consider the topline number in the Journal article: In 2013, only 3.6 percent of households headed by adults younger than 30 owned stakes in private companies compared with 10.6 percent in 1989.
Or ponder the data from the Kauffman Index of Entrepreneurial Activity, which show that since 1996 Americans ages 20-34 have started companies at a lower rate than those older than them. And while entrepreneurial activity according to this measure has declined for most age groups in recent years, the drop among young adults is particularly sharp.
As the Journal piece says, there are different theories about what is behind the decline in business ownership among young Americans, ranging from lack of experience to high levels of indebtedness. At the Kauffman Foundation’s 2015 State of Entrepreneurship Address, held next month in Washington, DC, we will explore these theories, as well as counter-arguments for why there is reason to actually be optimistic about a surge of entrepreneurial activity among younger Americans—in particular, those in the Millennial generation.
At the State of Entrepreneurship Address, we will also consider another important demographic group’s contributions to entrepreneurship—Baby Boomers. Together, the rise of Millennials and the aging of Baby Boomers represent two of the biggest demographic developments in America. These shifts will have profound effects on the state of entrepreneurship in the United States for years to come.
Though many may not guess it, older Americans are an important source of new business creation. Improvements in health are allowing Americans to live longer, more productive lives. And with a wealth of experience, there is good reason to be optimistic about their potential as entrepreneurs.
At the same time, potential entrepreneurs in the Baby Boomer generation face challenges that could limit their entrepreneurial impact.
Thankfully, public policy can mitigate some barriers and open new entrepreneurial opportunities for Americans in these, and all, age groups—but only if policies are based in facts and not myths.
Popular perceptions of Millennials and Baby Boomers may lead the most well-intentioned policymakers astray, causing their policies to fall short of intended goals. Good research, open minds and candid conversation are necessary to dispel myths and ground policy in reality.
A forthcoming report from the Kauffman Foundation and the State of Entrepreneurship Address will contribute important data and ideas that will help policymakers understand both the historic trends and present activity of these demographic groups so that they can shape a future more conducive to entrepreneurial growth.
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