The Case of the Million Missing Entrepreneurs

"Entrepreneurs? I don't see any entrepreneurs around here. Try the gated community down the street." Image courtesy of imagerymajestic at FreeDigitalPhotos.net

“Entrepreneurs? I don’t see any entrepreneurs around here. Try the gated community down the street.” Image courtesy of imagerymajestic at FreeDigitalPhotos.net

The Washington Post‘s Jim Tankersley breaks down a new paper by an economist at the World Bank with a dramatic premise. The paper tracks the rate of entrepreneurship from the 1970s to today. The author found that small business creation rates increased through the decades until they stagnated in the early 2000s, and, “after the Great Recession, the rate fell. If the trends of the previous 30 years had continued, the nation would have seen 1 million more entrepreneurs over the last decade than it actually did. For some reason it did not.”

That’s a startling figure. What happened? The paper “traces it largely to families earning between $41,000 and $151,000 in today’s dollars (a very broad definition of middle class, it should be noted), who constitute 60 percent of all business-owning households, but who flatlined on their rates of new business ownership after decades of growth.”

The paper says that the middle class suddenly stopped creating small businesses at a time when wage stagnation and income inequality took hold. How do we get back on track? The good news is that raising the minimum wage will definitely help by pumping more money into the local economy. But we need a broader array of progressive policies to ensure that money flows through the whole economy and not just the top one percent—overtime reform, protection of benefits, some way to deal with the pernicious contracting of the American worker.

In the end, an insecure middle class is a middle class that shies away from small business creation. We can’t have a vigorous economy without those new businesses spending money and hiring workers and encouraging local businesses to invest in the community. We need to coax those million entrepreneurs back out onto the playing field, or else the economy will continue to stagnate.

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Paul Constant
Paul Constant has written about politics, books, and film for Newsweek, The Progressive, the Utne Reader, and alternative weeklies around the country.