What can we learn from The United States’ decline in the field of entrepreneurship?
Increasing unemployment rates across the globe has one more time brought the issue of entrepreneur contribution in labor market into question.
Steve Jobs’ biography which was published just after his passing away has been the bedside book of almost everybody in business circles. Having the characteristics of an iconography, the book is one of the latest examples that demonstrate the value United States gives to its entrepreneurs. United States is perhaps the only country in the world that glorifies its entrepreneurs to such extents. As famous writer Malcolm Gladwell once said, entrepreneurs are the new prophets of the United States… Although the icons of the last 20 years like Steve Jobs, Mark Zuckerberg and Bill Gates have proven the country’s potential as a leading innovation economy, they have also delayed the facing of the inevitable reality: For the past30 years the country has been on a downward trend in terms of entrepreneurship. However as the dark shadow of unemployment, the country’s most pressing economic problem grows larger, the role of entrepreneurs begun to be questioned. Especially in the US, entrepreneur contribution in labor market is being scrutinized once again.
There is no doubt that labor market was one of the areas where the effects of the global economic crisis was felt the worst. Since 2009, a total of 27 million newly unemployed people joined the existing 400 million who have already been waiting to be employed. According to reports published by International Labour Organization (ILO), in order to stop the increase in unemployment rates, the world economy has to create 600 million new jobs. At the time being this seems highly improbable as even United States who has been the most capable country in the world in terms of creating jobs is now witnessing one of the toughest periods in its history. While the campaign for the upcoming elections is at full throttle, President Barack Obama breaks out in cold sweat when he has to comment on unemployment, since during his office, even start-ups come up with the worst average of the past 20 years in job creation. Start-up companies have been able to create jobs for only 7.8 out of 1000 Americans since 2009. During Clinton’s office the rate was 11.2. According to the Business Dynamics statistics of the US Census Bureau, start-up companies constituted 12 percent of the economy during the 80s while today they constitute less than 8 percent. Consequently start-up companies’ contribution in total employment declines significantly. The downward trend started at 4 percent during Reagan’s office and declined to 3 percent in 2006 and fell to 2 percent today.
On the other hand, it is interesting to note that the percentage of people establishing their own businesses has reached the highest rate of the past 14 years. However a significant number of such businesses have transformed into indicators of an unhealthy labor market. The main reason why people are establishing their own businesses is the fact that they are unemployed. The statistics show that secondary school graduates with a lower chance of finding a job rated the highest among people who recently established their own businesses. Another noteworthy development is the fact that the highest percentage of these newly established businesses operate in construction industry which was one of the most severely affected by the crisis at the first place. Perhaps people who lost their jobs in construction industry as a consequence of the crisis have no chance but hold on in the same industry since this is what they do. Moreover, most of these new businesses are established by people of Hispanic origin who have always rated high in unemployment statistics.
Being unable to create new jobs is an epidemic threatening not only the US which dropped back 7 points in Global Competitiveness Index but also the entire world economy as a whole. Re-employing the unemployed and making them a part of the labor market again constitute one of the greatest challenges that the giant economies of the world have to face. It seems that nothing will change much as long as the uncertainty of the global economy hinders investments across the globe.
WORST TIME FOR START-UPS
In the Us, start-up companies have been able to create jobs for only 7.8 out of 1000 Americans during Obama’s office. This is the worst average of the past 20 years.