Financial challenges facing today's young adults are stifling their entrepreneurial dreams. The results of a nationwide survey published by EY, a professional services firm, and Economic Innovation Group, a policy and advocacy group, suggest millennials' economic hardships prevent them from starting businesses.
"Millennials are on track to be the least entrepreneurial generation in history," EIG co-founder John Lettieri told the U.S. Senate Committee on Small Business and Entrepreneurship earlier this year. Millennials admire startup founders and revere self-employment, the new survey findings show, but they're wary of starting businesses in an unforgiving economic environment.
With hordes of young people selling homemade clothing on Etsy, driving for Uber and opening food trucks on every corner, and with a much smaller group founding influential tech companies, this generation embodies the spirit of a "startup culture."
In an op-ed, published on Mic.com, Hillary Clinton described the millennial generation as the most "diverse and entrepreneurial generation in our country's history." Fifty-five percent of survey respondents shared her belief that millennials are more entrepreneurial than the previous generation.
And yet, according to a study by the Small Business Administration, less than 2 percent of millennials in 2014 were self-employed, compared with 7.6 percent of Generation Xers and 8.3 percent of baby boomers. This suggests that millennials are failing to start businesses. And in 2015, the Brookings Institution reported steady declines in new business formation over the past decade. According to research by the Kaufman Foundation, young people accounted for 23 percent of new entrepreneurs in 2013, down from 35 percent in 1996. Clearly, millennials are failing to live up to their "entrepreneurial" reputation.
The EY/EIG survey data implicates financial barriers as the culprit of this failure to launch.
A whopping 42 percent of respondents cited insufficient financial means as the biggest obstacle to starting a business. According to the report, millennials make less money and have higher levels of debt than previous generations. Fifty-three percent of respondents have student loan debt or are expecting to take on student loan debt in the future. And most of them worry about their ability to pay loans back. High levels of debt make it difficult for young people to save for retirement or obtain credit to start a business.
The report also suggests that financial insecurity has increased risk aversion among millennials. Only 22 percent of respondents believe starting a company would be the best way to advance their careers. Today's young people see launching startups as too risky given their cash-strapped reality.
"While they truly respect entrepreneurship, they worry that they will not be able to overcome the significant financial and regulatory hurdles associated with starting a business," says Kate Barton, EY Americas vice chair of tax services.
Other notable takeaways of the survey include:
- 62 percent of millennials "have considered starting their own business."
- 78 percent of survey respondents who know someone that has launched or worked for a startup consider that person successful.
- 72 percent feel that startups and entrepreneurship are "essential for promoting innovation and jobs."
- 30 percent of all respondents and 40 percent of single respondents live with their parents.
- 54 percent of millennials believe their standard of living will be lower than their parents.
- 78 percent of millennials "are worried about having good job opportunities."
- 79 percent of millennials "worried that they will not have enough money to retire."
- 63 percent report that they "would have difficult covering an unexpected $500 expense."
Maria Hollenhorst is an NPR business desk intern.