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Member News: C.C. Eship / NACCE Journal Spring/Summer 2010

Entrepreneurship Addresses both Unemployment and Underemployment

Wednesday, April 21, 2010   (0 Comments)
Posted by: Matthew Montoya
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By Felix Haynes

President, Hillsborough Community College, Plant City Campus 

Tom Tankersley, Grants Coordinator, Hillsborough Community College, Plant City Campus

As the U.S. economy beginsnavigating itself out of the most significant economic downturn since the Great Depression, it appears the course set for recovery may be one that demands endurance and requires a significant restructuring of the country’s labor force. With so much emphasis over the last few years on the Labor Department’s figures on unemployment, less attention has been paid to another major factor stifling economic recovery–underemployment.

The underemployed are defined as members of the labor force working part-time, when they would prefer to work full-time, as well as those individuals working below their respective skill level or outside of their area of expertise. The computer engineer working at Starbucks, the laid-off factory worker with two part-time retail jobs, and the registered nurse working as a home-help aide all represent the underemployed class. As a recent Wall Street Journal article pointed out, the effect of the underemployed should not be minimized. With consumer spending making up such a significant part of the nation’s economy, the underemployed, with their lower incomes and higher expenses towards benefits they once received in fulltime positions, simply cannot spend as they once did.

Perhaps as one response of employers to the recession, this class of workers continues to grow as recovery remains stalled. According to the U.S. Bureau of Labor Statistics, since the recession began over two years ago the number of people involuntarily working part-time jobs has more than doubled to 9.3 million. Recently, Federal Reserve Chairman Ben Bernanke raised the issue of underemployment in a speech to the Economic Club of New York. Bernanke pointed out that the rate of underemployment is rising at a rate faster than during previous recessions, while the average workweek has dwindled to 33 hours. How to address the under-utilization of labor in this country is an important question, and its answer is directly tied to the future health of the U.S. economy.

A Solution

Entrepreneurship can provide part of the solution to the underemployment problem. Noted author and business thinker Peter Drucker summed it up succinctly, "Entrepreneurs innovate and innovation is a central ingredient to economic growth.” But hasn’t the current economic climate stifled entrepreneurship? Some indicators suggest this premise to be false.

The Kauffman Foundation’s 2009 Index of Entrepreneurial Activity shows a rather steady level for business formation as the recent recession unfolded. In fact, the rate of entrepreneurial activity actually rose, albeit by the small percentage of 0.30 percent, from the previous year. During 2008 this rate translated to 530,000 new businesses every month. Additionally, the Kauffman Foundation found in a recent study that nearly all net job creation in the United States between 1980 and 2005 occurred in firms less than five years old.

Maybe it should come as no surprise that entrepreneurial activity is not dramatically affected during economic downturns. Recessions disrupt the business world’s "status-quo” and change the way businesses operate and prioritize their practices. Often during these times businesses not only shed jobs, but also reduce risk and abandon innovation. A recent Deloitte Consulting survey found in its polling of more than 450 companies that even in the best of times business innovation is lacking, with 31% of surveyed companies responding that innovation happens "by accident” in their company. Contrast this with the fact that, according to the Small Business Administration, small technology companies produce 13 times more patents per employee than large firms.

A Critical Advantage

Simply stated, during both deep recessions and economic boom periods, entrepreneurs are in a unique position to transform ideas into tangible (and hopefully profitable) innovation. Many of the workers classified as underemployed are in a unique position as well. Now, perhaps for the first time in their careers they may seriously examine the possibility of starting their own small business. Using their experience and individual skills they may be able to stabilize their personal financial situations, while playing a significant role in promoting economic growth within their communities.

As recent history shows, businesses founded during weak economic times have been instrumental in the development of many significant innovations on the market today. Companies such as Sun Microsystems, Compaq Computer Co., and Adobe Systems all had their beginnings in the recession of the early 1980s and today stand as examples of entrepreneurs who searched for opportunity, responded to it, and concentrated their efforts on effective innovation.

It should also be noted that one crucial advantage for potential entrepreneurs exists for the unemployed and underemployed of this recession that was not in place 30 years ago– education. Five hundred colleges and universities currently grant entrepreneurship degrees. In today’s economic climate, with reports that over 6 million of the currently unemployed have been searching for gainful employment for six months or longer, these entrepreneurship programs are poised to produce today’s entrepreneurs who will be better prepared to drive tomorrow’s economic growth.

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