Hope and Change: Economy

Here are some additional (beyond last Friday’s) sobering economic statistics. They come from an article by Ed Carson, in the conservative Investor’s Business Daily:

➢ The employment-to-population ratio for those aged 25-54 dipped to 75.6% in June, down sharply from 80% in January 2008. Economists view the core employment ratio as one of the cleanest labor market views, because it includes those who have stopped looking for work while excluding retirees and young adults in school.

➢ Entrepreneurial activity is fading, with establishments less than a year old down 26% from the peak of 747,278 in 2006. Not good, because our economic hope lies with the next generation of entrepreneurs.

We earlier wrote about how online courses can help those not in four-year universities better themselves. But the leading way to improve your financial situation is still to start your own business.

Scott Gerber is the founder of the Young Entrepreneur Council, co-founder of Gen Y Capital Partners, and author of Never Get a "Real" Job. Gerber writes:

As millions of college students graduate straight into the unemployment line this year (two out of three carrying student loan debt, at an average of $26,000) educators, employers and politicians need to ask one themselves one question: How much longer are we going to tell this generation that "good" jobs will simply reappear? They'll be waiting for some time -- most job openings by 2020 will be in low-wage professions like fast food, retail sales, and truck driving. Last year, 54% of all bachelor's degree-holders under 25 were either jobless or underemployed. Since 2008, fewer than half of new grads were able to find jobs within a year of graduation -- down from 73% before the recession started.

The old paradigm -- get good grades, go to college, get a job, start a family -- is becoming a luxury for the few. Yet, nostalgically, we still push our young people into this failing system, clinging to hope that the next graduating class will heal itself.

Gerber has found that 40% of young Americans age 8 to 24 either want to start a business or already have. He says, “we must stop discouraging Millennials from creating their own jobs after graduation.” After all, all net new jobs come from startups. What’s missing today is the needed government, academic, and private sector job training and support for budding entrepreneurs.

High school seniors should learn about the alternatives to "real" employment, including freelancing and franchising. That would spur job creation, lower the student loan default rate (currently rising above 9%), and fuel what Gerber calls “a needed cultural shift toward self-sufficiency”:

Just as the immigrant entrepreneurs who built America once did, the key to Gen Y entrepreneurs' success is in building the next generation of nuts-and-bolts, low-overhead businesses that grow organically over time and eventually create wealth – and, in many cases, jobs. . . it's time to embrace a paradigm shift. America has a long history of entrepreneurial thinkers.

A additional endorsement for entrepreneurial self-sufficiency comes from a truly surprising source--New York Times columnist Nicholas D. Kristof. Note, however, that Kristof’s comments relate not to American youth, but to impoverished African villagers. Yet why is the message not universal?

Kristof writes:

[In Africa] and in much of the world, the [anti-poverty] solution is savings groups like [Malawi peasant] Biti Rose’s. . . With a loan of $2, Biti Rose started making and selling a local version of doughnuts, which she initially sold for 2 cents each. “People really liked my doughnuts,” she noted, and soon she was making several dollars a day in profit.

Inspired by her example, [formerly useless husband] Alfred began growing vegetables and selling them; he turned out to be a shrewd businessman as well. . .Biti Rose and Alfred then had the resources to buy seed and fertilizer for all their own land and to lease an additional two acres as well. These days, they hire up to 10 farm laborers to work for them. In the old days, they harvested less than one bag of corn a year; this year, their harvest filled seven ox carts.

Kristof is an incurable liberal. He credits CARE, the international non-profit, with starting the micro-financing group Biti Rose joined (and we know some educated, elite-type CARE agent led Kristof to Biti Rose). Kristof proclaims outside interventions partly work “when they give poor people hope,” making this wonderful entrepreneur’s success more about the city-based expertise that came her way and less about her native self-determination. Kristof at least adds that even without CARE’s help, the savings groups have spread to nearby areas.

Outside help is beneficial, as Gerber himself advocates. But the true heroes, the people who create the jobs, are the folks who lay it all on the line to start a business. "Hope and Change" will be for real, if it results in more entrepreneurs.