Start-up rates among young people double since recession – and they’re here to stay

September 27, 2013 by
Filed under: Enterprise 

By most accounts, life is pretty tough for young people growing up in the UK. Just over 1 million are classed as ‘NEETs’ – not in education, employment or training – and this is having predictable consequences for their health and wellbeing. Research by The Prince’s Trust indicates that 37 per cent of NEET young people are often or nearly always depressed. And even for those who do find work, there is a good chance their jobs will be characterised by zero hour contracts and part-time work.

So far, so gloomy. Yet there is one piece of good news amidst all the pessimism.  Figures just released by the Global Entrepreneurship Monitor survey* show that entrepreneurial activity among young people has jumped once again, so that it is almost twice the rate it was at the outset of the economic downturn. Whereas 5 per cent of young people in 2008 were in the early stages of starting a business, today it is closer to 9.5 per cent (see graph below).

graph

The question is, what’s caused the growth in start up activity? The most obvious answer is that it’s a desperate response to a lacklustre economy and frozen job market. The argument runs that young people are now creating their own jobs because they can’t find any elsewhere. Therefore as soon as the economy picks up pace and things ‘get back to normal’, we’ll see the line in the above graph dip back to its usual lows.

There is no doubt some truth in this – indeed you can’t ignore the fact that entrepreneurial rates were stationary until the great recession hit. Yet it is clear that economic ‘necessity’ is only one driving force among many.  Our own conversations with young people reveal that the search for meaning, greater freedom and the chance to leave a mark on the world are just as important motivators for starting a business. It is striking how many of the young people we spoke with talked of the urge to ‘create’ and vent ‘frustration’.

What the recession did was to shake things up and bring these tensions to the surface. True, it destroyed jobs and forced people to look elsewhere for work – often in the form of self-employment. But it also prompted deep reflections on the nature of work itself, what it is we really want from life and whether starting a business could help us achieve those ends.

For that reason, it feels as though this dramatic increase in young enterprise is unlikely to be a temporary blip, but rather a permanent feature of our economic landscape.

 

*Thanks to Professor Mark Hart of Aston Business School for the data.

Benedict Dellot is a Senior Researcher in the RSA’s Enterprise team. Follow him on Twitter using @BenedictDel 


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