Economic Perspective: A Slowdown in Start-ups

MARY WALDEN:

“Today’s program looks at a slowdown in start-ups. Mike, many people have dreams of starting their own businesses. Traditionally, our country has encouraged this entrepreneurship because it helps generate new ideas, industries and employment. But recent statistics show the rate at which new business start-ups are occurring is slowing. What’s going on”?

MIKE WALDEN:

“Well, this isn’t a recent trend. In fact, we have seen a secular decline in the rate of new business start-ups. And today, the rate at which new businesses start is half of what it was 30 years ago. So that gives you the scale here of the decline”.

“Now, as always, we look for reasons, several possible reasons. One, baby boomers are retiring, the millennials are taking their place and its taking the millenials time to figure out how to start new businesses, get new ideas, et cetera. And if that’s the case, this will eventually correct itself”.

“Others point directly to regulations. They say, particularly, the new financial regulations following the Great Recession are making it harder for new start-ups to get credit. I think there’s some truth there. And then lastly, we see that job creation, which traditionally has been larger for small firms and start-up firms, is really shifting towards existing firms. So it’s making it harder for start-ups to find workers”.

“Now one study found that there’s no shortage of new business ideas out there. People are perculating ideas all the time. It just seems to be harder for them to market them and get a new business start-up. So this is a key factor to watch because over time the rate at which we get new businesses, new ideas, new products really moves the economy”.