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News : Innovation Last Updated: Mar 10, 2011 - 7:40 AM

'Jobless Entrepreneurship' rises and immigrants account for 29.5% of US startups in 2010
By Finfacts Team
Mar 9, 2011 - 2:19 AM

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High US unemployment maintained the high rate of US startups in 2010 and immigrants account for 29.5% of new firms. However, the trend has been termed 'Jobless Entrepreneurship' because entrepreneurs are opting for a self-employed status rather than hiring employees.

According to the 'Kauffman Index of Entrepreneurial Activity,' (pdf) a leading indicator of new business creation in the United States, 0.34% of American adults created a business per month in 2010, or 565,000 new businesses, a rate that remained consistent with 2009 and represents the highest level of entrepreneurship over the past decade and a half. In contrast, however, the quarterly employer firm rate has dropped from 0.13% in 2007 to 0.10% in 2010.

"Since it began, the recession has triggered annual declines in the rate of employer enterprise births," said 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. This trend, if it continues, could have both short- and long-term impacts on economic growth and job creation."

Capturing new business owners in their first month of significant business activity, the Kauffman Index of Entrepreneurial Activity provides the earliest documentation of new-business development across the country. The percentage of the adult, non-business-owner population that starts a business each month is measured using data from the monthly Current Population Survey (CPS), conducted by the US Bureau of the Census and the Bureau of Labor Statistics. In addition to this overall rate of entrepreneurial activity, the Kauffman Index presents separate estimates for specific demographic groups, states and select metropolitan statistical areas (MSAs). It provides the only national measure of business creation by specific demographic groups.

New 2010 data allow for an update to previous reports, revealing important shifts in the national level of entrepreneurial activity, and in the demographic and geographic composition of new entrepreneurs across the country between 1996 and 2010. View an interactive data visualization spanning all 15 years of the study

"Regional patterns have a significant effect on entrepreneurial activity rates," said Robert W. Fairlie, the study's author who is a professor of economics, based at the University of California, Santa Cruz. "From 2009 to 2010, entrepreneurial activity rates increased in the West, further widening the gap between the West and other regions. Rates in the South remained steady, but declined in the Northeast and Midwest."

Other key findings for 2010 include:

  • The immigrant rate of entrepreneurial activity increased substantially - - from 0.51% in 2009 to 0.62% in 2010 - - and declined slightly for the native-born. This increase expanded the large positive gap that already existed between immigrant and native-born entrepreneurial activity rates. 

  • A growing immigrant population and rising entrepreneurship rate contributed to a rise in the share of new entrepreneurs that are immigrant, from 13.4% in 1996 to 29.5% in 2010.

  • Entrepreneurial activity increased slightly for men and decreased slightly for women. For men, the entrepreneurial activity rate increased from 0.43% in 2009 to 0.44% in 2010. The female entrepreneurship rate decreased from 0.25% to 0.24%.

  • The African-American entrepreneurial activity rate decreased from 0.27% in 2009 to 0.24% in 2010. The white entrepreneurial activity rate decreased from 0.33% to 0.31%.

  • The entrepreneurship index was highest among the least-educated group, moving from 0.49% in 2009 to 0.59% in 2010, suggesting an increased number of people entering entrepreneurship out of necessity. The largest decrease in entrepreneurial activity occurred for high school graduates.

  • Among the United States fifteen largest metropolitan statistical areas, Los Angeles had the highest entrepreneurial rate (0.62%) in 2010. Philadelphia had the lowest rate (0.15%)

Veteran journalist Tom Brokaw’s special report on the NBC Nightly News said that immigration rules are roadblocks for enterprising foreigners who want to stay in the United States to create companies and jobs:

SEE: Finfacts article; Immigrants responsible for at least 25% of American startup firms; Push for more visas for highly skilled foreign nationals

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© Copyright 2011 by Finfacts.com

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