Tuesday, June 21, 2016

Why Are So Few Millennials Entrepreneurs?

By Zachary Slayback at FEE. Excerpts: 
"Entrepreneurship among young people is actually relatively uncommon."



"the percentage of young Americans who are entrepreneurs dipped to less than 4% in 2015"

"Between local, state, and federal regulations placed on everything from who is allowed to braid hair to who can tell you what color to paint a wall and where to place a door and a schooling culture and system that encourages young people to waste away the first 22-30 years of their lives away from the market, the systems placed upon young people today create a climate extremely hostile to entrepreneurship and economic growth." 

"Americans today are the most regulated and taxed in the country’s history. While some tax rates have dropped in recent years, they’ve been offset by increases elsewhere and the unprecedented and massive growth in the bureaucracy. It’s harder today to simply start a business because of the number of regulations with which one must comply."



"A few decades ago, Tina may have started a small salon out of her basement when she realized that she had a knack for designing nice and fun haircuts for her friends and family and also realized that this could earn her some extra money for her kids. She’d clear some space away in the basement, put up a sign advertising her service, and even have her nephew man the front desk as business picked up. Not so today. Today, she’d have to pass a number of boards and certifying examinations saying that she is qualified to provide this service (never mind if customers thought she was qualified — it was her competitors who would judge her boards and exams), get a commercial license from her local government, incorporate as a business, get a federal EIN for tax purposes, buy a regulation-friendly sign, and hire staff at a much higher price than her nephew was willing to do the work. And that’s just to get off the ground and get started."

"If you start a business that issues dividends, you have to pay a capital gains tax.

Most investments (including launching a small business) come with a certain level of risk and are only made if the would-be investor can expect a minimal growth on the payout. If they know that half of their profits are going to be taxed away by the feds and the state government, many people will decide to forego the investment in the first place. Why work twice as hard at creating a profitable business so that you can keep just as much (if not less!) than a waged job would provide?"


 

"It’s not uncommon to have to pass tests in certain states in order to do your trade. If you’re a doctor or an airline pilot, this might make intuitive sense. But what about a florist? Or a hair braider? An interior designer? How about these 102 lower-income occupations?"

"But if we recall the WSJ report showing the decline in business ownership between 1989 and 2015, we’ll see that the biggest dip happened before the recent spike in outstanding student debt. The growth in lifetime-crushing student debt likely contributes heavily to the decline in the past 15 years, but the fact that a large dip happened before this period might indicate that the problem isn’t that fewer people can’t start businesses but rather that people don’t want to start businesses. (source)

"Most successful entrepreneurs are courageous — a trait that school and a coddling parental generation can beat out of young people.

Most business owners held some kind of other job before launching their business. If they’re working in the startup world and are offering a new and unique service, chances are even higher that they worked for years in a specialized field before launching their product or service. The spike in degree inflation has made it harder to enter the workforce at a younger age. Jobs that had no or minimal credentialing requirements just a few years ago now require a BA or a graduate degree. It’s not uncommon to find internships that require a graduate degree.

Getting your foot in the door and gaining experience as a young person is harder than ever. For many entrepreneurs, this experience at another firm was integral to their own venture. This means that would-be entrepreneurs find themselves putting off ventures for years while they complete the formal education requirements to gain the experience they feel is necessary before launching."

"One final factor that I suspect contributes to the decline in entrepreneurship is the effect that schooling has on thinking differently. Successful entrepreneurs (and successful people in general) cite thinking differently than the pack as one of the most important factors for their success. Whether it’s making an investment will pay off big time or going to work somewhere that has a lot of potential for growth, these people all set themselves apart first by their thinking that allowed them to make these decisions. They then had the work ethic to carry through and execute on these ideas."

"To succeed in the schooling environment requires nearly the exact opposite as succeeding in the marketplace — an above-average work ethic is the only arguable shared trait. Schools reward conformity in thought and problem-solving. They reward conformity in tastes and desires. The kid who wants to go off and do something entirely different than his peers is shunned or at least finds it difficult to make friends."



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