American entrepreneurialism has been in a steady state of decline and that’s worrisome as large companies have near-monopolies in major parts of the economy, writes Derek Thompson, economics reporter for The Atlantic.
“Entrepreneurship, as measured by the rate of new-business formation, has declined in each decade since the 1970s, and adults under 35 (a.k.a. Millennials) are on track to be the least entrepreneurial generation on record,” he writes in the magazine’s October issue. “The share of all businesses that are new firms, meanwhile, has fallen by 50 percent since 1978.”
Census Bureau data show that the new-business formation rate has fallen from about 17 percent in 1977 to 10 percent in 2014, the last data available. The business exit rate also has fallen steadily, although it jumped during the last recession in 2009.
The decline of startups is worrisome because it may be stifling U.S. economic growth as large corporations with few competitors aren’t compelled to drive innovation, Thompson writes.
“After years of sluggish wage growth and low levels of entrepreneurship, some people are starting to worry that America’s biggest companies are growing at the expense of the economy, even if they offer consumers good deals,” he says.
Sen. Elizabeth Warren, who made the targeting of too-big-to-fail Wall Street banks a central theme of her campaign for Senate, voiced concern that technology companies like Apple, Amazon and Google are abusing their power, Thompson says.
“Left unchecked, concentration will destroy innovation,” she said. “Left unchecked, concentration will pervert our democracy into one more rigged game.”
Best Places for Small Business
Small business can be similar to real estate. Three of the most important factors are: location, location and location.
Small-business start-ups have always flocked to San Francisco and New York City, but these cities didn't make CNBC’s top 20 list.
Not only are they among the most expensive U.S. cities in which to live but their states offer small-business owners 2 of the 3 worst business tax climates in the country, according to the Tax Foundation (New Jersey is the third state).
“There are areas that are emerging as small-business hot spots, offering entrepreneurs a vibrant, educated workforce, low cost of living, a business-friendly tax climate and a great quality of life,” CNBC reported.
The top 5:
5. Charlotte, North Carolina
The unemployment rate is 4.9 percent, a little below the national average, but the average salary is slightly above, at $48,290. Charlotte had the 10th-largest population growth last year among big cities, according to the Census Bureau, with 828,000 residents. "The city's nonprofit Business Innovation and Growth Council works to foster entrepreneurship and connect small-business owners with the resources to help them grow," CNBC explained.
The local economy has expanded since residents voted to legalize recreational marijuana in 2012. The Denver metro area has a low unemployment rate, of 3.1 percent, which helps explain why the average salary is $53,060, well above the national average of $47,230. "Businesses looking to set up shop in Denver will find a well-educated workforce. The University of Colorado and the University of Denver are located here and help turn out graduates needed for the thriving aerospace, biotech and telecommunications industries," CNBC explained.
3. Washington, D.C.
Accounting firm PricewaterhouseCoopers said venture capital firms pumped more than $700 million into new DC-area tech companies last year. That cash infusion is balanced by above-average wages and a 6.1 percent unemployment rate, higher than the national average. "The tax climate in D.C. can be a challenge for businesses just starting out. Individual income-tax rates range from 4 percent to 8.95 percent, and the general consumer tax rate is 5.75 percent. But with a steady economy, thanks in large part to the federal government, and lots of government agencies as potential customers, small businesses can find a solid business environment in the Washington, D.C., metro area," CNBC said.
2. Provo, Utah
The metro area prides itself on being start-up friendly. "The city's entrepreneurial hub is called — what else? — the Startup Building and rents desks and other co-working spaces to spur collaboration and innovation among freelancers, small-business owners and inventors," CNBC said.
1. Austin, Texas
The Austin metro area is especially small-business friendly. "There's a young, educated workforce (the University of Texas is based in Austin), no state individual or corporate income taxes, and enough different industries represented to offer an array of opportunities for start-ups. It ranked No. 1 on our list for the highest number of small businesses created, as well as the metro area with the fastest population growth. Technology is a key driver of small-business growth," CNBC explained.
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