A reader relates to the topic:
I am an entrepreneur, and I can tell you that in my experience, the biggest problem facing new business formation today is the explosion of consumer debt – especially student debt. If you did the overlay on the Brookings graph of new firm formation with student debt, one would be the inverse of the other.
Having debt makes you less risk-tolerant. Period. It’s bad enough to fail, but failing and having the bank up your ass and a bankruptcy hanging over your head really blows.
Another is on the same page:
Contrary to persistent belief on the right, people take risks when they have something to fall back on. In recent years, with college becoming so ridiculously expensive (along with healthcare), people are much safer as small cogs in large bureaucracies that make their money by rent-seeking. The great examples of such behavior would be the oil companies, Microsoft, and other large conglomerates.
The counterexample would be Google. It is not a surprising that Google’s workforce consists disproportionately of people whose parents held teaching jobs in universities (both in India and abroad) – jobs which that largely remained immune to the vicious debt cycles that pervade the workforce in the outside world.
Another turns to healthcare costs:
The long-term downtrend reflects people trapped in jobs in order to get affordable healthcare. As health insurance costs have gone up, the entrepreneurial spirit has been suppressed. My guess is that the recent uptick represents people who can now try to implement their entrepreneurial ideas.
Here’s a personal example. I recently wrote you about plans a former coworker and I have for starting a business. Both of us had been self-employed entrepreneurs for many years before seeking a corporate position with insurance. He and I have talked for years about the possibility, but neither of us was willing to give up our employer-based healthcare and take the risk of having no insurance, since we both had pre-existing conditions that no insurer would accept. Now we can proceed.
Related experiences from readers here and here. Meanwhile, an American in Canada offers a view from abroad:
Expats tend to shy from starting businesses because of the tax compliance issues. Tax law in resident countries contradicts US rules and results in double-taxation. And from a funding standpoint, very few non-US citizens who understand the IRS’s odd way of determining who falls under its jurisdiction are willing to partner with Americans in business. Americans are viewed as financial liabilities.
I’ve looked into opening my own business where I live in Canada, but it’s simply not worth the effort when I calculate the double accounting costs and the fact that the FEIE (Foreign Earned Income Exclusion) credit that’s often cited as being “unfair” is unavailable to those who work for themselves. Throw in FATCA and new compliance rules, which require a person to document and submit to the IRS annually every aspect of one’s financial life, and it’s a wonder anyone burdened with American citizenship – inside or outside of the country – would start a business at all.
The Dish 