Trends raise doubts about future of entrepreneurship

Raymond Keating
Raymond Keating

Entrepreneurship long has been viewed as part of the American dream, a component of the DNA of Americans and embedded in our culture. Moreover, entrepreneurship has offered a key competitive advantage for the United States in the global economy.

But are things changing — for the worse?

There are serious questions, according to various measures of entrepreneurship that have declined in recent years. That was laid out in a report I wrote titled “Gap Analysis No. 3: Millions of Missing Businesses.” As summarized
in that analysis: “According to various measures of entrepreneurship and business activity, the U.S. has suffered, at best, a dramatic decline in entrepreneurship and the number of businesses over the past near-decade.” The analysis found that the economy is missing about 3.7 million firms and startups based on a combination of the most often cited self-employed and employer firm data.

If entrepreneurship is to remain part of American culture, then our institutions should reinforce the critical importance of entrepreneurship to our economy and make clear that while choosing to start and run a business isn’t easy— and is, in fact risky — the potential rewards are considerable and varied.

Obviously, what’s being taught and communicated by our educational institutions stand out as essential to the future of entrepreneurship.

The latest Gallup-HOPE Index offers a look at the potential future of entrepreneurship via a survey of 1,006 students in grades five through 12. The survey offered varied findings.

For example:

While in 2011, 45 percent of students said that they planned to start their own businesses, that fell to 41 percent in 2016. While that 41 percent runs well ahead of the share of Americans who actually own their own businesses, the slight downward trend isn’t welcome news.

Most striking was the dramatic decline of nonwhite students saying they want to start their own business, which declined from 54 percent in 2011 to
42 percent in 2016. Meanwhile, white students were basically unchanged — 39 percent in 2011 and 40 percent in 2016.

Another distressing finding is that older students are far less likely to say that they want to start a business. Among those in grades five to eight, 55 percent said they want to start a business, while only 27 percent of those in grades nine to 12 said so.

Not surprising, it’s clear children of business owners are more likely to say that they want to start a business as opposed to children of non-business owners —
52 percent versus 35 percent, respectively.

Finally, on a positive note, students from lower-income families were more likely to say they wanted to start a business — 50 percent among households with annual income of less than $36,000,
44 percent with incomes between $36,000 and $90,000 and 35 percent with incomes over $90,000. This is encouraging given that business ownership offers a notable way to climb the economic ladder.

With some glimmers of hope, the general survey findings of American students regarding entrepreneurship is far from encouraging. The culture apparently has changed, including assumed attitudes toward entrepreneurship. That requires a more concerted effort to make clear to students — and people of all ages — the benefits to individuals, families, employees, consumers and the overall economy of robust levels of entrepreneurship.