The Challenge of Declining Dynamism

In a 2016 poll from the United States Senate, millennials overwhelming responded that entrepreneurship is essential to the economy, and they consider someone working at a startup a success. Yet when asked about the best way to achieve success, a majority chose employment at one company and working their way up as the best option. This conservative preference is not a coincidence. Millennials carry more student debt, face rising housing costs, and have less confidence about the future than previous generations.

In policy debates about the future of work, experts emphasize opportunity, training, and skills. They compartmentalize and therefore rarely mention the financial stability people need to explore those opportunities.

[ from The Committee on Small Business and Entrepreneurship United States Senate ]

This decline has far ­reaching implications. Americans are far less likely to start a company today than they were 30 years ago—far less likely to see starting a business as a pathway to realizing the American Dream. This corresponds with a series of other interrelated trends that point to a less dynamic future.

Americans today are also less likely to move to new areas of the country. They are less likely to switch jobs. The average company is rapidly getting older. Industry sectors are seeing widespread consolidation. Historically, the churn caused by a steady influx of new businesses has acted as a kind of shock absorber for our economy. This is no longer the case. Even as the global economy has undergone massive transformations driven by technology and globalization, the U.S. economy is rapidly becoming less flexible, less able to adapt, and less efficient at allocating resources—including its most precious resource: human capital.

These changes are felt most acutely in those parts of the country that have fallen behind and are struggling to replace lost industries and millions of middle class jobs. As a result, a rising tide of geographic inequality separates millions of Americans from the economic gains of the national recovery, as fewer areas than ever are carrying the bulk of overall U.S. economic growth.

The consequences are dire. A less entrepreneurial America is one with increasingly limited opportunities to realize the American Dream.

Today’s policymakers will decide if our economic future belongs to the incumbents, or if we will instead renew the entrepreneurial spirit that has fueled American dynamism from the very beginning.