While Entrepreneurship Declines, Freelancing Grows in Popularity Among Millennials

“People ages 20 to 34 created 22.7 percent of all new companies in last year [2013], down from 34.8 percent in 1996,” according to an article from Walter Hamilton of the LA Times. In the article, Hamilton contends that the “image of the U.S. as bursting with entrepreneurial zeal, it turns out, is more myth than reality.” To support his claim, he uses Census Bureau data to point out that the rate of business creation has fallen steadily for more than three decades – falling nearly 28 percent from 1977 to 2011.

Hamilton and others contend that similar to other age groups, the decline in millennial entrepreneurship is driven by decrease in entrepreneurial zeal due to increased risk aversion among workers, shifts in government regulation and a consolidation in corporate America. However, several recent surveys about millennials indicate that the entrepreneurial zeal is strong among the millennial generation. According to Deloitte Millennial Leadership Study, 70 percent of millennials want to launch their own startup. In comparison, only 20 percent of millennials aspire to senior leadership in a large, established organization. The U.S. Chamber of Commerce Foundation’s recently released Millennial Generation Research Review, which reported similar survey results showed almost 66 percent are interested in entrepreneurship. 

Driven by instability in the workplace, business scandals, and downsizing of their parents’ jobs after loyal years of service, many millennials view entrepreneurship and individual branding as a necessary alternative to the traditional corporate ladder model. Millennial leaders also view entrepreneurship as less risky than their older counterparts, because of the new digital era and their technological savvy. These conflicting reports beg the question: If it is not entrepreneurial zeal, what are the obstacles that keep millennial’s from launching businesses?

According to the Millennial Generation Research Review, the primary obstacle that keeps millennials from launching a startup is the inability to access startup capital – mostly driven by high student loan debt.  The Survey indicated that almost two-thirds of respondents claimed a lack of startup capital keeps them from starting a business. While older potential entrepreneurs also have faced difficulty in accessing startup capital, millennial entrepreneurs have faced a more difficult time because they have little equity and high debt-to-income ratios.

In addition to a lack of startup capital, surveyed millennials also report a lack of education and resources to run a small business. Instead of focusing on reducing tax and legal barriers to launch a business, millennials would also like to see Congress make it easier to start a business by providing increased access to education, training, and student loan relief. While Entrepreneurship curriculum has been added to more than 2,100 U.S. colleges and universities across the country, survey respondents said that “they didn’t feel the course work prepared them to start a business.”

A future potential roadblock to millennial entrepreneurship, especially among those who age out of their parent’s healthcare coverage at age 26, is the healthcare mandate that requires all U.S. citizens to have some level of healthcare coverage. Established under the Affordable Care Act, the requirement may dissuade many millennial entrepreneurs from starting a business due to the additional regulatory burden and cost of having an individual healthcare plan.

Millennial Freelancers Driving Growth in Freelance Economy

While entrepreneurship among millennials declines, millennial freelancers are becoming a driver of the growing freelance economy. Almost 40 percent (20.1 million millennials) of all freelancers are below the age of 35, according to a new report – Freelancing in America: A National Survey of the New Workforce. The freelance economy includes independent contractors, moonlighters, diversified workers, and freelance business owners. Millennials are drawn to freelancing because it offers flexible work schedules, the ability to have “a positive impact on the world,” and they find the work exciting. Almost 77 percent of all freelancers believe the industry will continue to grow and be driven by innovation assets such as virtual workplaces, social networks, coworking spaces, skill exchanges, and freelancer-run collectives.

While freelancing is often associated with the arts industry (e.g., writing, graphic design, photography), the largest demand for freelancers is among the Science, Technology, Engineering, & Mathematics (STEM) fields. According to industry respondents, demand for STEM freelancers include:

• Computing, computing peripherals, or other IT manufacturers – 98 percent in demand;
• Data science and analytics – 87 percent in demand;
• Mobile and web programming – 81 percent in demand; and,
• Technology – 83 percent in demand.

Millennials are uniquely positioned to fill this demand because of their technological savvy and ability to offer specialized skills that might be difficult to find in new technology areas such as programming and additive manufacturing.