Entrepreneurship Shrinking Among Under 30s

Young entrepreneurs disappearing.
Young entrepreneurs disappearing.

The number of young entrepreneurs has reached its lowest number in 24 years, according to data collected by the Federal Reserve for 2013. The statistics, recently released by the Wall Street Journal, point to a serious crisis in the future of business formation in the coming years.

Only 3.6 percent of households who are headed by someone under 30 years-old own part or all of a private company. Compare that with 10.6 percent in 1989 when the Federal Reserve began keeping track. In 2010 6.1 percent of such households had a stake in a private business.

The numbers show that the stereotype of 20-somethings as risk-takers is incorrect, but are consistent with data that show that the number of new US businesses fell during the first quarter of 2014.

Several explanations for this worrisome downturn have been offered. One explanation is that in our post-recession economy raising money for new businesses has been an obstacle to business creation. Add to this the fact that the fastest growing sectors, such as healthcare and energy require larger than average sums to get going. Another contributing factor could be the struggle young people have had finding their place in the workforce. It has been harder in recent years to gain the skills and experience needed to successfully start a business. Young people simply don’t feel qualified to go out on their own.

Analysts also say the trend is not likely to end any time soon. As the job market improves many young people find that it is simply easier to go get a job than to start a business.
One other factor seems to be that young people today seem to be more risk averse compared to their elders. Donna Kelley, a professor at Babson College said that young people have less confidence than in the past. Kelley conducts an annual survey which has shown that over 41 percent of the 25-to-34-year-old cohort of Americans who had an opportunity to start a business admitted that fear of failure would prevent them from moving ahead with the business. In 2001 that number was only 23.9 percent.

“The fear of failure is the measure we should be most concerned about,” Kelley said.

About Jonathon Bowes

Jonathan Bowes started his career in banking. After a few years, he took courses in business and finance and worked his way up the corporate ladder. Today, while writing part-time for Business District, Bowes assists talented people to find jobs in the field of economics. Contact Bowes at Jonathon[at]businessdistrict.com