What booming entrepreneurship means for your labor market

If you were an entrepreneur support organization or, say, a startup news publisher in 2019, you were operating in seeming futility — completely on faith. Americans had started fewer and fewer businesses each year since the 1970s. One advocate told Technical.ly in 2019 that Millennials were on track to be the least entrepreneurial generation in American history.

The pandemic changed everything. Business starts surged. Even today, three years after the fall, Americans are incorporating businesses at rates not seen since the 1980s. And the surge has come from nearly every demographic group — Black women in particular have started a disproportionately high share of new businesses.

That may be a contributing factor to the stubbornly tight labor market. More than ever before, hiring managers have to pay attention to startup trends — for economic activity, yes, but also because the workforce is bending with its impact. Nuisance or not, on the whole, though, the American entrepreneurship boom is a bright light of the economy.

What’s the catch?

Well, for one, solo entrepreneurs increasingly mirror American demographics. Those with employees? Less so. Put another way, women and Black and Hispanic people do start a good number of businesses. They’re just less likely to grow them.

And we know growing companies matter. It’s the most economically productive wealth-generating tool we have — better than boosting your Zillow valuation.

It’s also where jobs come from. A 2013 analysis showed that all net new jobs come from new firms. Big companies are important because they employ most Americans; they operate at scale. Small businesses are important because they give us culture.

But if you want more jobs for more Americans, if you want wealth to be more proportionately distributed by race, if you want to develop new products and services, then you have to care about entrepreneurship.

What does that mean for company and ecosystem builders?

• For you entrepreneurship support orgs: Helping business start is good; helping them grow is better.
• For you hiring companies: You’re going to lose more candidates and employees to entrepreneurship. Good. Let them go, welcome them back.
• For both: Mergers & Acquisitions already replaced Research & Development for many companies. It will increasingly be a hiring strategy, too.

One Technical.ly client recently told me she was surprised more large employers don’t look at startup founders as possible candidates, too. Some entrepreneurs proudly boast they’d never work for someone else, but more commonly, professionals experiment with both traditional and self-employment. Contrary to the fable of riches, research has shown that median earnings for entrepreneurs can fall below those with steady employment. For every winner, there are many who lose out. Employers might shy away from those who have worked for themselves. That seems to be a mistake. As entrepreneurship booms and the labor market stays tight, employers may have no other choice but to reconsider.