Nancy Folbre is an economics professor at the University of Massachusetts, Amherst.
Legend has it that Marie Antoinette, told of Parisians protesting the shortage of bread, impatiently exclaimed, “Let them eat cake.”
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American Express’s chief executive, Kenneth I. Chenault, adopted a kinder tone in his commencement speech this year at the University of Massachusetts, Amherst, but offered a similar message. Acknowledging that jobs are hard to find, he emphasized that new technology makes it easier to invent them.
Yes, and the price of cake may have fallen relative to bread, but that is slim consolation to college graduates who face weak demand for their hard-won skills either as workers or entrepreneurs. Their new diplomas may send them to the front of the employment line, but the jobs they find there don’t offer as much money or career potential as before.
A recent report from the Economic Policy Institute estimates that the inflation-adjusted wages of young college graduates declined 8.5 percent from 2000 to 2012. Graduating in a poor job market has long-lasting negative consequences.
Such lemony facts can be turned into lemonade and sold by the side of the road. The business news media brims with celebration of millennial entrepreneurship and the rise of freedom-seeking freelancers.
But entrepreneurship goes up with joblessness partly because it just sounds so much more hopeful. It also looks better on a résumé, since reported spells of unemployment reduce job chances.
Largely as a result of “jobless” or “unintended” entrepreneurship, the number of individuals starting businesses increased in recent years. But the number bailing out grew even faster. The Great Recession reduced self-employment over all because sole proprietorships and small businesses were so hard hit by the downturn.
Scott Shane, professor of management at Case Western Reserve University, points out that the median family incomes of the self-employed declined sharply relative to others from 2007 to 2009.
He also emphasizes that start-ups are not revitalizing the United States labor market. The number of people employed in one-year-old businesses declined by half from 1990 to 2010.
“Despite the claim that recessions are a time of opportunity for entrepreneurs,” he explains, “the Great Recession had a negative impact on U.S. entrepreneurship.” The same can be said of the Not-So-Great Recovery.
In 2012, the number of venture capital deals was substantially lower than in 2007. The total amount of venture capital investment declined as well, to about 75 percent (in inflation-adjusted terms) of that in the earlier year.
A recent Congressional Budget Office report shows that small and medium-size companies had disproportionately greater job losses than large companies in recent years. The latest Intuit Small Business Employment Index registers levels far below that of 2007.
These trends show that employment and entrepreneurship aren’t substitutes but complements.
The same factors that are hurting the job market are making it hard for start-ups and small businesses to succeed: consumers aren’t spending enough money to create an expansion on their own, and austerity-driven cuts in government spending are weakening economic growth.
As Heidi Shierholz of the Economic Policy Institute puts it, the declining prospects of young college graduates are clearly the result of “a demand problem, not a skills problem.”
Individual effort and ingenuity can’t guarantee success in either finding or inventing jobs.
Our national problem may be that we assume entrepreneurs are superheroes who can leap over macroeconomic constraints in a single bound, especially if liberated from the villainous clutches of government.
But entrepreneurs can be crippled by a shortfall of demand for the goods and services they offer. And like the rest of us, they need bread, or at least cake, to survive.
Article source: http://economix.blogs.nytimes.com/2013/05/27/let-them-make-their-own-jobs/?partner=rss&emc=rss