Why aren’t millennials pursuing entrepreneurship?
BY BAZE CONWAY
Millennials are possibly the most scrutinized generation in modern society. Characterized as the tech generation, millennials utilize smartphones for everything, from finding dates to pursuing a career. An infamous 2017 60 Minutes interview characterized millennials as the generation of entitlement and luxury spending, creating the long-running jokes about avocado toast and expensive coffee. While a quick search will yield hundreds of different takes on what defines a millennial, one uncommon belief is undeniable: young adults are less entrepreneurial than ever before. In fact, according to a 2017 study by the Kauffman Foundation, the number of entrepreneurs between ages 20 and 34 has fallen 14 % percent since 1997.
While young people may be opening fewer and fewer businesses, it’s not due to lack of interest or motivation. A 2017 survey by the Economic Innovation Group found that 62% of 18-34-year-olds have considered starting their own business. 42%, however, cite a lack of finances as a significant barrier to pursuing entrepreneurship. One financial stressor that young Americans face more than ever before is increasing student loan debt. Between 2004 and 2014, there was an 89 percent increase in the number of students who borrowed money for their education. Additionally, the average balance has grown by 77 percent from $18,233 to $27,689. Likely due to this ballooning debt, millennials also appear to be increasingly averse to risk-taking: more than 40 percent said that the fear of failing kept them from starting a company in 2014, where only 24 percent listed risk of failure as a major concern in 2001. When young people have such significant debt, it’s no wonder that they are averse to taking risks. It’s easier to take a job with a steady, reliable income flow rather than risk failure with debt hanging in the balance.
The decline in entrepreneurship rates for young adults could have consequences in the future. New firms continue to represent the largest source of new job creation for the U.S. economy, consistently outpacing larger firms. If the rate of new entrepreneurship for millennials continues to stagnate or decline as they age—and if this trend continues as younger generations enter the workforce—new graduates may find it increasingly difficult to find the jobs that they need to pay off the rising cost of education.
And while student loan debt is more of a federal issue, the state government could help solve this problem. Tennessee should explore ways to remove barriers for the thousands of young people interested in pursuing entrepreneurship. A great start would be allowing consumers, rather than the state, to choose winners and losers by ceasing to make corporate welfare deals with large established corporations. The state should also seek to remove burdensome barriers to entry—such as occupational licenses—that serve to keep new competition out of industries.
By fostering an open and fair business environment based on competition, young entrepreneurs will be much more likely to take the risk of starting a new business.