A recent study by KfW analyzes data on startup trends in Germany and Europe. The fear of failing in one’s own business venture in an environment where failure is common has evidently had a negative impact on the entrepreneurial spirit. As a result, the percentage of people who preferred to be self-employed declined from 2009 to 2018 across all age groups: Among 30- to 49-year-olds, 39% still wanted to be self-employed in 2009. By 2018, that figure had dropped to just 23%.
The decline was even more pronounced among those over 50: in 2009, 41% in this group wanted to be self-employed; by 2018, only 22% wanted to start a business. Only among those under 30 was the decline not as steep: here, the figure fell from 45% to 35%.
Starting Your Own Business: Politics and Business Must Take Action
Young people, in particular, want to start their own businesses. In this respect, the downward trend is also a consequence of demographic changes: as the proportion of young people in the country decreases, so does the desire for self-employment.
New business startups are innovative. Even if they do not introduce new products or services, competition will drive existing market participants to improve. It should therefore be a priority for policymakers and the business community to increase the rate of new business startups—at least back to pre-financial crisis levels; ideally even higher, to offset the demographic effect.
The potential is there: Legal and financial support for young entrepreneurs
Both policymakers and the business community must therefore provide support to enable young people to start a business. Without the right conditions, this will not happen. Young people need role models, knowledge, opportunities to test their ideas, financing, and legal support. The business community can provide all of this. Young people also need the right social structures. This is where policymakers must step in, for example, by offering startup grants and training programs.
It is also important to tap into the vast untapped potential among women who can envision starting a business but ultimately do not follow through. This is often due to a combination of factors: a lack of role models is just as much a factor as the belief that running one’s own business is incompatible with starting a family. Both are misconceptions: there are plenty of successful self-employed women who can serve as role models.
Thanks to parental leave policies—which now allow fathers to stay home for twelve months with pay—balancing family and career is easier today than ever before.
As is so often the case, the potential is there! Many young people want to start their own businesses. They see a future for themselves and their ideas. The business community and policymakers should take action to harness this potential. It would be a classic win-win situation.
