Entrepreneurs: the engines of growth
Why are so many young people around the world unemployed? EY’s Susanne Tillqvist remains confident that we can avoid a lost generation — but the time to act is now.
Governments are turning to entrepreneurs and SMEs in the recognition, perhaps belated, that they are significant engines of both job creation and economic growth.
The International Labor Organization (ILO) reports that almost 13% of the world’s youth — close to 75 million young people — are unemployed and many are also underemployed relative to their training and capabilities. In the worst-hit countries, youth unemployment rates have risen well above 30%.
Policy-makers worldwide are increasingly looking to entrepreneurs and start-ups to both kick-start their economies and provide the jobs that will sustain growth.
We recently analyzed the challenges and issues facing young entrepreneurs in the G20 markets. Our report, Avoiding a lost generation, was based on a 2013 survey of more than 1,500 entrepreneurs from across the G20 countries, including 1,000 entrepreneurs aged 40 and under.
Through our research, young entrepreneurs identify five key imperatives for action:
1. Expand the choice of funding alternatives
Funding remains the biggest stumbling block for entrepreneurs looking to start their own businesses. Nearly three-quarters (73%) say access to funding remains very or somewhat difficult in their countries. Traditional funding — such as business angels, private equity and venture capital — remains even more limited for the younger entrepreneur. Addressing the funding gap must be a key priority for G20 nations.
2. Increase mentoring and broader support
There is a pressing need to provide these growing businesses with a stronger support ecosystem:
- Business incubators
- Start-up programs
- Entrepreneurs’ clubs and associations
These help facilitate networking and the sharing of best practices.
3. Change the culture to tolerate failure
The public must change their perception of start-ups and be more aware of the contributions they make to the broader economy. Having a supportive entrepreneurial culture that embraces small and medium enterprises (SMEs) will have a positive effect on their future growth. This can be done in a number of ways:
- Governments need to promote entrepreneurs as crucial job creators
- Society needs to be more tolerant of failure and recognize entrepreneurs as men and women who provide innovative products
- Schools and universities can help students make career choices
Young entrepreneurs also highlight the need for success stories and role models.
4. Target and speed up incentives
Young entrepreneurs report an urgent need for government-backed initiatives across areas such as:
- Support services
Governments also need to recognize differences between the needs of male and female entrepreneurs.
5. Reduce red tape and excessive taxation
Young entrepreneurs will not succeed in greater numbers until governments create a simpler, SME-friendly business environment. More than one in two (53%) believe this would provide a crucial boost to their efforts. Thirty-three percent say the development of a single government agency to help new businesses with regulation would do most to help, while 14% back the creation of a single government agency to help new businesses with tax filing requirements.
Providing young entrepreneurs with the tools and support they need is clearly a critical component in tackling the youth unemployment crisis. With unemployment remaining far too high, the time to act is now.