The magazine states the value of entrepreneurs to the U.S. economy is overrated and a misconception pushed upon the American people.
A few weeks ago in an article about the struggling economy, a writer for Time magazine said the idea that "entrepreneurs are the foundation of the economy" was one of five "destructive myths" being pushed upon the American people.
Further disrespecting America's entrepreneurs, the writer, Rana Foroohar, goes on to say, "Entrepreneurship is still one of America's great strengths, right? Wrong." Instead we're told that the growth of the financial sector starting in the 1980s diverted all the potentially great entrepreneurs away from business ownership and towards a career on Wall Street. (What the heck was Amazon's Jeff Bezos thinking when he abandoned Wall Street and moved to Seattle to sell books?)
So, I must have been hallucinating in the 1990s when the entrepreneurial revolution took hold. Seriously, I understand that in order to make a point, it's easy to pick the specific statistics that support your notion and ignore the rest. Time reports there was a 23 percent drop in the rate new firms were created from 1980 to 2008, and from that concludes entrepreneurs are not important to the U.S. economy. Although I am not a statistician, I have some stats to share as well:
- There were more than twice as many small businesses in existence in 2008 (over 29 million according to the Small Business Administration's Office of Advocacy) than there were in 1980 (12.5 million).
- In 1980 about 5.5 percent of Americans owned a small business; in 2008 about 9.6 percent did.
- 451,000 new firms were created in 1980. Between then and 2008, there were only two years (1982 and 1983) when fewer businesses than that were started.
- 64 percent of all net new jobs in America in the past 15 years were created by small businesses.
There's no question the Great Recession had a significant impact on small business startups. In 2009 (the last year for which we have statistics) there were only 404,000 new firms created, the lowest number in decades. But does that negate the impact we entrepreneurs have on the economy? Frankly, I don't see how it can.
Here are some more facts: Small businesses employ slightly more than half of all private-sector workers, pay 44 percent of the total U.S. private payroll, and contribute to more than 50 percent of nonfarm, private GDP. How is that not a fundamental part of the foundation of our economy? What financial condition would America be in if we small business owners didn't contribute what we do?
The article then mentioned the "youth-unemployment crisis." According to Time, the youth unemployment rate is 24 percent. Of course, that is extraordinarily (and intolerably) high. Since small business owners are (as I just pointed out) the majority employer in the United States, doesn't it make sense that if you help us (perhaps a payroll tax cut would be a good incentivizing start), we're the logical ones to put a dent in youth unemployment?
Of course, we can't do that on our own. The partisan battles going on in Washington and statehouses all over the county need to stop, and smart actions need to be taken. As business owners, we know the reality is you cannot save your way to prosperity; you have to spend money to make money. So let's train those unemployed youths and retrain other unemployed workers to do the jobs we need done. Let's do something about the fact that the cost of health care is rising … again. A report from PwC's Health Research Institute says costs will rise 8.5 percent in 2012, up from an 8 percent increase this year.
Obviously, I know a lot of entrepreneurs. I hear from them about their challenges, concerns, solutions, innovations, and ideas every day. They understand how profound the economic crisis still is. They know firsthand that consumers aren't spending like they used to. They know better than anyone how fragile the so-called recovery has been, and how consumer and small business confidence numbers have been riding a roller coaster for far too long.
When researching this column I found an interesting pattern in recession and recovery cycles. Following the recession that ended in 1991, there was a two-year recovery followed by five years of strong business creation, averaging about 510,000 new firms a year. Similarly, after the 2001 recession and two years of recovery, new firm creation was even stronger, averaging about 536,000 a year.
The Great Recession officially ended two years ago. Given how much deeper it was than the recessions of 1990-91 and 2001, we can safely assume the recovery will take a bit longer than two years. But when it happens (and we all know it will), you can bet that, no matter what Time magazine thinks, entrepreneurs will once again be leading the way.
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