Many Entrepreneurs Stay Independent

Less entrepreneurs are hiring employees, choosing to go it alone when running their businesses. A recent study by the Kauffman Foundation shows that the number of startup businesses …

Less entrepreneurs are hiring employees, choosing to go it alone when running their businesses. A recent study by the Kauffman Foundation shows that the number of startup businesses in America is the highest it’s been in 15 years. Many of these entrepreneurs are choosing to limit their hiring and take on a large load of the work themselves. See the following article from The Street for more on this.

Entrepreneurs are deciding that they’d rather not hire.

According to the Kauffman Index of Entrepreneurial Activity, a leading indicator of U.S. business creation, 0.34% of Americans created a business per month last year — 565,000 new businesses, according to the study, published Monday by the Kauffman Foundation. The rate matched 2009 figures, the study found, representing the highest level of entrepreneurship over the past 15 years.

But new firms that had employees fell to 0.10% from 0.13% in 2009, the study found.

That doesn’t bode well for an economy struggling to right itself, since an important factor in an improving economy is job creation. Private-sector jobs, particularly in the small-business sector, make up a majority of new job growth.

While monthly job numbers released Friday by the Labor Department were uplifting, it doesn’t mean we are out of the woods.

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"Since it began, the recession has triggered annual declines in the rate of employer enterprise births," according to a statement by Carl Schramm, president and CEO of the Kauffman Foundation.

"Far too many founders are choosing jobless entrepreneurship, preferring to remain self-employed or to avoid assuming the economic responsibility of hiring employees," Schramm said. "This trend, if it continues, could have both short- and long-term impacts on economic growth and job creation."

The index seeks to capture new business owners in their first month of significant business activity by using data from the monthly Current Population Survey conducted by the U.S. Bureau of the Census and the Bureau of Labor Statistics.

Broken down by race, Latinos experienced the highest activity increase between 2009 and last year, to 0.56% from 0.46%. It’s the highest rate in the past 15 years, the study found.

Asian entrepreneurial activity rate was also high, rising to 0.37% from 0.31%.

On the other hand, African-Americans and non-Latino whites experienced declines in entrepreneurial activity rates, the study found.

Immigrants starting businesses had a particularly strong increase, to 0.62% from 0.51% in 2009, an rate that declined slightly for native-born people.

Entrepreneurial activity increased slightly for men and decreased slightly for women. For men, the entrepreneurial activity rate increased from 0.43 percent in 2009 to 0.44 percent last year. The female entrepreneurship rate decreased from 0.25 percent to 0.24 percent.

This article has been republished from The Street. You can also view this article at The Street, a site covering financial news, commentary, analysis, ratings, business and investment content.

 

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