by Mitch Kokai
Senior Political Analyst, John Locke Foundation
U.S. businesses are aging, I wrote last week, and a sharp decline in start-up companies is a big reason. As the share of young firms shrinks, the surviving companies are naturally older — and this may have huge ramifications for the economy. Established companies may create fewer jobs and innovations than do young businesses. So, what has happened to the United States’ vaunted entrepreneurs? The experts I contacted last week had a uniform answer: No one knows.
When you write “no one knows,” someone inevitably pops up claiming to know. I shouldn’t have been surprised a few days later to receive a 2013 book, “Where the Jobs Are: Entrepreneurship and the Soul of the American Economy,” written by John Dearie and Courtney Geduldig. (Dearie works for the Financial Services Forum, a trade group for big banks and financial firms; Geduldig is an executive at McGraw Hill Financial.) …
… Dearie and Geduldig in 2011 organized roundtables in 12 cities involving roughly 200 entrepreneurs. The idea was to discover what entrepreneurs thought was holding them back. Despite regional and industry differences, here are six widely cited problems:
1. Schools — K-12 plus colleges and universities — aren’t turning out enough skilled workers. “I have jobs,” said one Texas entrepreneur. “I just don’t have the talent to fill them.”
2. Immigration policy is too restrictive, making it hard to keep U.S.-educated foreigners who might fill the skill gap or might become entrepreneurs themselves. For example, the number of H-1B visas — widely used for foreign technical workers — is capped at 85,000 annually.
3. Investment capital is scarce. Banks find start-ups too risky. Venture capital firms, stung by losses from the 1990s dot-com bubble and the 2008-09 financial crisis, retrenched. “Angel investors” — individuals investing their money in start-ups — did the same. (These trends have somewhat reversed.)
4. Federal, state and local regulations add to overhead and distract entrepreneurs from managing their firms. “The degree of exasperation and .?.?. anger,” write Dearie and Geduldig, “did surprise us.”
5. Constant tax changes — again from all levels of government — also divert attention and raise costs. “We literally spend thousands of dollars a month on accountants,” said one entrepreneur, sometimes “getting bills for taxes that we’re not even aware that we owe.”
6. Heightened uncertainty — reflecting the legacy of the Great Recession and disillusion with Washington — has bred cautiousness. “We have absolutely no plans to upgrade our equipment or purchase new computers,” said one entrepreneur. “Any kind of long-term investment is off the table.”