Millennials can’t keep up with Boomer entrepreneurs

By Derek Ozcal, Kauffman Foundation

Boomer_treps_webIt’s well documented here at Growthology that we think entrepreneurship is closely connected to economic growth, innovation, and job creation. Consequently, it’s important to understand the factors that can estimate the likelihood of a person starting a business. Age is one of them. The connection between age and propensity to start a business is not yet widely studied, but of key importance in understanding entrepreneurship behavior.

 America is aging

The oldest cohort of Baby Boomers turned 65 in 2011, and the last cohort of Boomers will turn 65 in 2029. With a lower fertility rate for Americans after the Boomers, this means the general age structure of the United States is shifting older.

Research on age and entrepreneurship

Overall, an aging America has the effect of lowering the working age population as a percent of the overall population as Boomers retire. I’ve written previously about work by Karahan, Pugsley, and Sahin that indicates that fewer workers means fewer startups.

Most of the research on age and entrepreneurship focuses on two key age groups: millennials and baby boomers. In addition to the obvious difference in their current age, there are some surprising differences in entrepreneurship between these two groups.

Millennials: reality doesn’t match the myth

Millennials are not yet at the peak age for starting a business. The oldest millennials are just a few years away from entering the peak age for entrepreneurship, which despite pop culture perceptions is closer to 40 than 20. The Atlantic recently reported on the myth of the millennial entrepreneur. In part, this helps explain why the most recent Kauffman Index of Startup Activity showed the age 20-34 demographic group (0.22 percent) so much below the rate for other age groups. (This rate means that 221 out of every 100,000 adults in this age group became entrepreneurs in a given month.) It’s also worth noting that the rate of new entrepreneurs for the age 20-34 group is down from the high point for this age group of 0.28 percent in 1996.

Millennials are not at peak age for starting businesses, but they are still starting businesses at lower rates than other cohorts did when they were the same age. There is still much debate about the reasons. Some possible examples include student debt, timing of entry to workforce with the Great Recession, change in risk-taking attitudes, housing costs, among others. A poll by Young Invincibles found that Millennials identified student debt and lack of retirement savings as barriers to entrepreneurship, but some higher-education experts aren’t convinced of the student debt connection. Read more …

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