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Economix Blog: America’s Biggest Entrepreneurs: High School Dropouts

April 19, 2013 by Leave a Comment

CATHERINE RAMPELL

CATHERINE RAMPELL

Dollars to doughnuts.

Among America’s most celebrated entrepreneurs are college dropouts like Mark Zuckerberg, Bill Gates, Steve Jobs and Michael Dell.

But as it turns out, the country’s most frequent business founders are dropouts of a different kind: They dropped out of high school.

That’s according to the latest numbers from the Kauffman Index of Entrepreneurial Activity, as prepared by Robert W. Fairlie at the University of California, Santa Cruz. Professor Fairlie looked at different demographic groups, and what share of each group started businesses in any given month (which is generally tiny, less than 1 percent for basically all major demographics). When he looked at entrepreneurship by educational attainment, he found that people who had not completed high school were most likely to start new businesses.

Courtesy of the Kauffman Foundation. Courtesy of the Kauffman Foundation.

The chart above is based on data from the Labor Department’s monthly Current Population Survey. It shows the percentage of individuals (ages 25 to 64) who do not own a business in the first survey month but then started a business in the following month, with 15 or more hours worked per week. For those who didn’t complete high school, this entrepreneurship rate was 0.52 percent, compared with 0.32 percent for people in this age range over all.

So how is it that America’s least-educated are responsible for so much business creation, especially given that we might associate business acumen with more formal training?

“These high rates for the least-educated group suggest an increased number of people entering entrepreneurship out of necessity,” writes Professor Fairlie.

People with more education have more and higher-paying job opportunities available to them at existing employers. Those rare Mark Zuckerbergs of the world are founding businesses rather than finishing their formal education by choice, not because no one else will hire them. The same probably isn’t true for workers without a high school diploma.

Starting a new business, by the way, does not necessarily mean taking on employees. The Labor Department survey upon which this analysis is based does not, unfortunately, currently include information on employer versus nonemployer businesses. A majority of businesses showing up in these figures seem to be nonemployer businesses (sole proprietorships), given that the Kauffman Index of Entrepreneurial Activity shows 514,000 new businesses being created each month in 2012, whereas other measures that count only new employer establishments, like Business Employer Dynamics numbers from the Bureau of Labor Statistics, “indicate roughly the same number of new businesses per year,” Professor Fairlie’s report says.

Some other highlights of the report, about demographics of new business owners:

  • Men are much more likely to create new businesses than women are. Other groups with high rates of entrepreneurship, as measured this way, are immigrants and Latinos.
  • The construction industry had the highest rate of entrepreneurial activity of all major industry groups.
  • Montana, Vermont and New Mexico had the highest entrepreneurship rates, whereas Minnesota, Nebraska and Michigan had the lowest.
  • Among the 15 largest metropolitan statistical areas in the United States, Miami had the highest entrepreneurial activity rate in 2012, and Detroit had the lowest.

Article source: http://economix.blogs.nytimes.com/2013/04/19/americas-biggest-entrepreneurs-high-school-dropouts/?partner=rss&emc=rss

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Economix Blog: On Whether Women Can (or Do) Marry Younger Men

April 1, 2013 by Leave a Comment

In my earlier post on the economics of the viral Princeton Mom letter, I didn’t address another assertion of the writer: the suggestion that women cannot (or at least do not) pair off with younger men.

She wrote:

Here is another truth that you know, but nobody is talking about. As freshman women, you have four classes of men to choose from. Every year, you lose the men in the senior class, and you become older than the class of incoming freshman men. So, by the time you are a senior, you basically have only the men in your own class to choose from, and frankly, they now have four classes of women to choose from. Maybe you should have been a little nicer to these guys when you were freshmen?

I don’t have data about whether Princeton men, per se, are willing to marry older women, but there are national figures on the age gaps between heterosexual spouses.

Source: U.S. Census Bureau, Current Population Survey, 2012 Annual Social and Economic Supplement. Source: U.S. Census Bureau, Current Population Survey, 2012 Annual Social and Economic Supplement.

According to 2012 Census Bureau data, 85.9 percent of husbands are older than or about the same age as their wives. To break it down further, 52.6 percent of all husbands are at least two years older than their wives (based on their ages at the time of the survey, which could be less than a full 24-month difference).

Another 33.3 percent, a plurality, are within a year of the same age — meaning the wife could be older or the husband could be older, with that slim one-year margin of age difference. Assortative matching at work, once again.

That leaves 14.2 percent of all husbands who are at least two years younger than their wives.

At first blush, the distribution of those age gaps does not seem to have changed much since 1999, the earliest year for which I could find a directly comparable data table. (If you have access to earlier data, please let me know.) In 1999, 12.3 percent of husbands were at least two years younger than their wives.

If norms have changed sharply from then to now, of course, they probably still would not make a big dent in the overall age-gap numbers, since a lot of couples who would have been married before 1999 are still around. Indeed, as we’ve noted before, the annual new-marriage rate has been falling in that time period, meaning that any new preferences that are emerging for newly married couples would show up in a shrinking share of the total married population.

Article source: http://economix.blogs.nytimes.com/2013/04/01/on-whether-women-can-or-do-marry-younger-men/?partner=rss&emc=rss

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Economix Blog: College Premium: Better Pay, Better Prospects

February 19, 2013 by Leave a Comment

CATHERINE RAMPELL

CATHERINE RAMPELL

Dollars to doughnuts.

I’ve written before about the growing wage premium for college degrees: how the wage gap between workers with a bachelor’s degree and workers with no more than a high school diploma has been growing over the years.

But that statistic captures only part of the income premium that people with a bachelor’s degree enjoy as a result of completing college.

As I report in an article in Wednesday’s paper, people with college diplomas are much more likely to get jobs, period, than people without the credential. Part of college graduates’ income premium, then, comes from the fact that they are just more likely to be employed in a typical week. They are probably more likely to work the number of desired hours they wish to work, too, according to Gary Burtless, a senior fellow at the Brookings Institution.

You can see this in the unemployment numbers: The jobless rate for people with a bachelor’s degree was 3.7 percent in January, versus 8.1 percent for those with no more than a high school diploma.

Census estimates of median annual earnings help capture the college income premium. In 2011, the median male college graduate earned 1.95 times as much as the median male whose highest educational attainment was a high school diploma. In 1991, that ratio was 1.76. For women, the ratio is up, but not by as much: It was 2.03 in 2011 versus 1.99 in 1991, and it dipped in the intervening years.

Here’s a chart showing these earnings ratios over the last two decades:

Source: Census Bureau, Current Population Survey, Annual Social and Economic Supplements Source: Census Bureau, Current Population Survey, Annual Social and Economic Supplements

When I’ve written about this subject before, I’ve been criticized for lumping in people with advanced degrees with workers with no more than a college diploma, when the job prospects for those two groups might be very different. But even if you compare the workers with no more than a college degree with workers with no more than a high school diploma, the ratio in their median annual earnings has still been rising. (The darker lines in the chart above refer to the ratio in annual median earnings for workers with exactly a college degree, and no further education, compared to workers with exactly a high school diploma; the lighter lines show the ratio for all college grads compared to those with exactly a high school diploma.)

By the way, the Census Bureau numbers refer only to workers who have at least some earnings; they exclude people who have no earnings at all. Since a higher percentage of college grads than high school grads have at least some annual earnings — and since this differential has increased over the last 20 years, particularly for men — then these Census earnings numbers will actually understate the increase in the total earnings premium from college completion, as Mr. Burtless noted to me in an e-mail.

If recent trends continue — with employers increasingly demanding that job candidates show up to their interview with a sheepskin in hand — we should expect that the wage and employment advantage conferred upon college grads will only grow.

College can bring a lot of debt, yes. But these figures serve as a reminder that college also brings huge returns relative to how you might otherwise invest your tuition money.

Article source: http://economix.blogs.nytimes.com/2013/02/19/college-premium-better-pay-better-prospects/?partner=rss&emc=rss

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