Center for American Progress

Bringing Entrepreneurship Back to the Middle Class

Bringing Entrepreneurship Back to the Middle Class

Authors Adam Hersh and Jennifer Erickson discuss new data showing the steep decline in entrepreneurship in the United States and recommend solutions to bring it back.

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New research shows that from 2002 to 2008, the percentage of business-owner households dropped so considerably that the U.S. economy had 1 million fewer entrepreneurs than it would have had if it had kept pace from the 1990s. In the 2000s—as the middle class faced increased pressures and the nation experienced rising inequality—fewer people took the leap to become entrepreneurs, and more entrepreneurs closed down shop for other forms of employment. Furthermore, in his new paper, World Bank economist Camilo Mondragón-Vélez warns of “entrepreneurship [becoming] a viable option only for those with higher income and wealth levels.” 

Entrepreneurship is a key driver of U.S. economic growth and leadership in the world economy, and economic research shows that the middle class plays a central role in it. It is also evident that a vast swathe of U.S. society has felt a tightening financial squeeze over the past several decades. But what is truly striking, and what should give both policymakers and venture capitalists pause, is that these 1 million entrepreneurs—representing more than the population of San Francisco or Boston—were missing even before the full effects of the Great Recession hit. In the wake of the recession, the percentage of business-owned households dropped even further.

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