In the US economy, startups have always created key roles in providing jobs and pushing for innovation. Start-ups have also paved the way for the middle-class and have given employment opportunities to individuals without a higher education, who otherwise would find it difficult to secure a job from large corporations. While it may be surprising to find out that there has been a startup slump in the recent decade or even way back, here’s why economists believe that entrepreneurship among Americans is hitting a steady decline through the years.
In an article by Quartz, Dan Kopf writes that compared to 13% of companies who were less than two years old in 1985, there were only 8% of them in 2014. The share of people working for private companies that are less than two years old has also plummeted from ‘more than 9% to less than 5%’ from 1998 to 2010. During the eighties and nineties, small-time retailers and local stores were constantly losing to large retail and service chains. For starters, that caused a devastating effect to the local community but not enough of a crisis to shake the US economy as a whole. The startup slump has spread further to high-growth sectors of the economy, specifically in the tech industry which has generated employment for its high demand for jobs and has contributed to productivity growth.
Despite increasing profit from corporations, low inflation, and decline in unemployment, US productivity growth has reached a flat growth since the 1970s. Economists have come up with a lot of reasons for the decreasing statistics citing that a lot of significant inventions have already been discovered and that the rest that followed didn’t have much impact, or a ‘lag between the launch of new technology.’
While it’s true that startups have been crucial in creating a more productive economy as a whole through innovation in goods and services which have helped them compete with larger, existing corporations, the dotcom boom during the nineties might have created a vast but temporary opportunity for invention and expansion for small entrepreneurs during the advent of the internet. However, the tech industry is now dominated by titans such as Facebook Inc., Amazon, Apple, Microsoft, and Alphabet (Google), most likely intimidating and discouraging new players in the industry from entering the market due to the rigorous competition. These big tech companies also buy out startups before they make a name for themselves.
The government has taken initiatives on how to ease the way for small entrepreneurs to break into the market, with Democrat Senator Amy Klobuchar of Minnesota pointing out in a speech that ‘protecting competition speaks to the basic principles of economic opportunity and fairness.’ Together with Senator Elizabeth Warren of Massachusetts, they have vigorously pushed for antitrust enforcement. Even entrepreneurs themselves have pushed for their own advocacy by establishing their own group namely the Center for American Entrepreneurship, whose goal is to connect with policymakers on the local and national scale and find means on improving the circumstances regarding new businesses.
Experts can’t pinpoint for certain the real cause of the startup slump, but it’s important that the government and entrepreneurs work together to create an environment that recognizes the importance of small businesses and enhances their potentials. One way of showcasing your business out there is by a tradeshow display. Putting new businesses means more jobs, and a more productive economy.