The Decline of Entrepreneurs

The Decline of Entrepreneurs

As the economy declined and employment rates dropped in the past few years, it became more common for entrepreneurs to pursue this dream out of necessity and inability to find other employment.

New research from the Kauffman Foundation indicates that start-up businesses declined in 2013. The Kauffman Index of Entrepreneurial Activity is a leading indicator of new business creation in the United States. The research indicates that in 2013, an estimated 476,000 adults started new businesses, compared to 514,000 in 2012. It appears that when jobs at existing companies are available, people are more inclined to be an employee rather than taking the risk to be their own boss.

It was also reported that jobs commonly referred to as part of the “gig economy” are on the decline. This includes online jobs such as running a store on Etsy or Ebay. These fast-cash jobs are being given-up for security of regular employment. Consistent with the decline in entrepreneurship, these types of companies are also on the decline.

The majority of the different age groups also experienced declines in business creation rates, with the exception of those individuals aged 45 to 54, whose rate increased from 34% in 2012 to 36% in 2013. The difficulties of finding employment with appropriate title and compensation in the 45 to 54 age range appears to be a factor in their increased rate of business creation. Start-up business rates were lowest among the youngest group, aged 20 to 34, whose rate declined from 23% in 2012 to 18% in 2013.

“The 2013 business creation rate signifies a return to levels that we haven’t seen since before the recession,” said Dane Stangler, vice president of Research and Policy at the Kauffman Foundation, which conducts the annual study. “While we have speculated in recent years that changes in entrepreneurship rates could be driven by labor market conditions, this new data provides the strongest evidence we’ve seen of this correlation.”

If you have any questions about this study or would like to discuss your start-up business, please contact me, Dan Brecher, or the Scarinci Hollenbeck attorney with whom you work.