Can youth entrepreneurship work?

©Blend images/Alamy

Larry Page and Sergey Brin were young doctoral students when they created the company we now know as Google. Virgin’s Richard Branson started out in business as a teenager selling records. These big names are just part of a long list of young entrepreneurs that made it in business, a list that could include the founders of Facebook, e-Bay, France’s Free telecom and more.

Beyond such icons, readers of this article may know of less celebrated but nonetheless successful neighbours or friends from school who started their own businesses at a young age. They may also know of some who failed.

Making a go of it in business is not easy, but the idea is catching on, not least among the many young people facing a crisisravaged job market. Indeed, policymakers are also increasingly talking of youth entrepreneurship as a possible way of reducing youth unemployment. Are they right to place such hopes in what is, after all, an inherently risky pursuit? What, if anything, can policymakers do to give young people a start in business?

Youth Entrepreneurship, a policy brief prepared by the OECD with EU support, presents some answers to these questions, and some reality checks too. For instance, young 20-30-year-olds are far more interested in self-employment than older age groups, and though inexperienced and lacking in finances, see entrepreneurship as a potential career. However, only 4% of 15-24 year-olds are selfemployed in the EU, mostly in very small businesses, compared with 15% of adults generally. True, this low score could reflect the fact that many of young people study till their mid-20s, but also reflect barriers to setting up a business.

A closer look at that 4% can guide policy thinking in addressing them. For instance, youth-operated businesses are more likely than adult-driven ones to be involved in sectors such as construction and information technology. They operate locally, but are more open than older entrepreneurs to becoming more internationally oriented. Many of them operate on a part-time basis, which helps lower the risks and build up experience. This has practical advantages for education too: in the US, over 5% of young people in post-secondary education use part-time self-employment to fund their studies, for instance. But what about the success rate? No start-up is easy, and businesses run by young entrepreneurs have lower survival rates than those of older entrepreneurs. This is hardly surprising, given the many barriers young people face by way of experience, finance, networks, etc., and the very competitive sectors in which they tend to operate.

However, there is one encouraging trend which policymakers should seize upon: young people’s businesses that do survive have on average more growth potential than those of older entrepreneurs. Among businesses that survived three years, according to surveys, those run by people under 30 years old had an average growth rate of 206%—nearly double the growth rate of businesses run by those over 40.

Youth Entrepreneurship lists an array of steps for policymakers to follow, covering such issues as how to nurture entrepreneurial skills, provide advice, mentoring and financial support, and address infrastructure needs. It also contains some enlightening examples, of financing from Canada, the Think Big initiative in Europe, Project GATE in the US, and more.

As the authors admit, more data and learning is clearly needed to build better youth entrepreneurship policies, but the underlying message of this policy brief is clear: though young entrepreneurship is risky and should not be seen as a panacea for tackling unemployment, it has the potential to provide many people with real opportunities. Policymakers could do a lot more to make youth entrepreneurship happen, and by extension, bring benefits for society as a whole. Rory Clarke

© OECD Observer 294 Q1 2013

OECD (2012), Policy Brief on Youth Entrepreneurship: Entrepreneurial Activities in Europe, OECD LEED Division, Paris.

See also http://www.oecd.org/employment/

Produced with EU support.




Economic data

E-Newsletter

Stay up-to-date with the latest news from the OECD by signing up for our e-newsletter :

Twitter feed

Editor's choice

  • Is there more to life than football?
  • Economic Outlook: GDP growth in the OECD area is projected to accelerate to a 2.2% rate in 2014 and 2.8% in 2015, according to the Economic Outlook issued 6 May. The world economy will grow at a 3.4% rate in 2014 and 3.9% in 2015. Still, major challenges remain. Watch the live press conference by clicking here.
  • OECD Yearbook 2014
    This year's OECD Yearbook focuses on major topics such as inclusive growth, jobs and trust.
    Online Edition is now available!
  • "There is no shortcut to equipping people with the right skills and to providing them with opportunities to use their skills effectively."

    - Andreas Schleicher, Special Advisor on Education Policy to the Secretary-General, OECD Yearbook 2014

  • Data Lab Image
  • Interactive charts showing aid (ODA) provided by DAC members; by recipient countries and by sector. Click to compare your country.
  • OECD Insights Blog
    OECD Insights Blog by Brian Keeley:
    Results are out for the OECD’s PISA student assessments on “creative problem solving”.
  • Better Life Index
    How do you measure a Better Life?
    The OECD has launched a new interactive infographic where visitors can explore the priorities of people worldwide. Be a part of it. Create and share your Better Life Index.

Most Popular Articles

Subscribe Now

<b>Subscribe now!</b>

To receive your exclusive print editions delivered to you directly


Online edition
Previous editions

Poll

Is deflation a major risk in OECD economies?

Yes
No
Don't know

OECD Insights Blog

NOTE: All signed articles in the OECD Observer express the opinions of the authors
and do not necessarily represent the official views of OECD member countries.

All rights reserved. OECD 2014