Startup nation continues to be mired in stagnation. American entrepreneurship has been on a decades-long decline, one that’s belied by the rise of new household names like Google, Facebook and even Uber. Starting a new business has supposedly never been easier, yet more businesses are dying than are being created and new businesses keep shrinking as a share of all companies. As a result, just as the American population has been aging, American businesses have as well.
The trend has been clear for a while, but the reasons for it haven’t been. As economists Ian Hathaway of Ennsyte Economics and Robert Litan of the Brookings Institution put it in a new paper published last week:
“How could it be that the American economy, built on the sweat and ingenuity of some of history’s greatest entrepreneurs, now have more businesses closing each year than new ones opening doors? And with all of the seeming technological disruption and popularity of entrepreneurship around, how could it be that mature firms are more entrenched than at any point in at least the last couple of decades?”
The two economists answered those questions by offering what they described as a partial explanation.
Their report honed in on two factors. The first relates to demographics, but probably not in the way you might think. To wit: One possible explanation for the decline in entrepreneurship is that America’s aging has resulted in a smaller share of the population in the prime ages for entrepreneurship, 35 to 44 years old. The economists found that the changes in that population don’t match up neatly with changes in the rate of new firms being started. “So, while an increase in this portion of the population might be a boost to startups in the future, we don’t believe it played a role in the recent decline,” they write.
Source: Fiscal Times | Yuval Rosenberg