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The Policy Dialogue on Entrepreneurship Informs and connects thought leaders looking to understand policies that help entrepreneurs start companies, create jobs and strengthen the economy. Sign up to receive our weekly update!
A growing economy constantly creates new job opportunities in new sectors, but also displaces and even destroys existing jobs. The workforce in an entrepreneurial economy must always evolve as well. Government efforts to protect jobs are often misguided, hindering growth and new job creation. Pro-growth workforce rules should instead focus on developing worker skills, allowing maximum hiring and layoff flexibility, and focus adjustment efforts on getting displaced workers into new jobs as soon as possible. Small firms employ half of all private sector employees and create 60-80 percent of net new jobs in the U.S., according to the SBA. Labor rules are one of the largest barriers to entrepreneurial ventures. The World Bank’s cross-country comparison of labor regulations shows lower job creation where workplace rules are more rigid. Labor rules must move beyond the early 20th century framework of management versus labor and encourage new firm formation as well as a dynamic, not static, worker.
“Lizard King” John Bello describes his first entrepreneurial venture as a miserable failure. Bello launched South Beach Beverage Co. in 1995. Despite the popularity of other geo-based drink brands such as Nantucket Nectars and AriZona iced tea, South Beach didn’t resonate with consumers, not even in the upscale Florida community that shared its name. Within two months, Bello knew the $2 million startup investment was heading, well, south.
Youth unemployment rates are soaring worldwide. That rate recently reached 15% in the UK, a record 25.5% in the U.S., and much higher numbers in other countries where economic growth and opportunity have long failed to keep pace with the growing number of young people entering the labor force. However, youth unemployment rates don’t have to translate into catastrophe for that generation and those it sustains. The very victims of the situation might actually benefit from it if policymakers can incentivize them to follow their dreams. In the U.S. alone, four in ten young people ages 8 to 21 have or would like to start their own business someday. These two statistics spell opportunity to me.
It is inevitable that a healthy economy will create new job opportunities, while also displacing existing jobs, as successful ventures survive and grow while others fail– even in good times. The process of job creation and economic growth relies on the constant “churning” of firms. Even so, new firms are responsible for the large majority of net new jobs in the U.S. From 1980-2005, firms less than five years old accounted for all net job growth in the country. This is why we need to approach labor rules carefully.
The economic downturn has placed a new focus on how to generate more “job creators” in our economies and made the idea of a global celebration of entrepreneurship as a path back to positive growth rates especially relevant. This past Saturday marked the 100-day countdown to what is now the largest entrepreneurship event in the world, kicking off November 16th, 2009 - Global Entrepreneurship Week - and I am asking for your help.
Many readers of this blog are familiar with the Kauffman Foundation and its work around the role of the entrepreneur as the chief agent for innovation, job creation and economic growth. Today, I would like to comment on another contribution of entrepreneurship to society- the expansion of human dignity.
A new study has confirmed it. A close look at our entrepreneurial history reveals that entrepreneurship is an engine for job creation and economic growth even during difficult economic times. This new study by the Kauffman Foundation suggests that policies that support entrepreneurship also support recovery. It also reveals that job creation from startup companies tends to be less volatile and sensitive to downturns when compared to the overall economy.
We have received an overwhelming number of “wake-up calls” alerting us to the need for change. Because such change can only arise from innovative thinking, we must nurture the innovative mind. Young, creative people around the world have the potential to design solutions to the most pressing global challenges, such as global warming, the spread of HIV/AIDS, and even financial risk monitoring.
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