Job creation remains the highest hurdle to a broader economic recovery. For all of the progress cited by White House economists, the unemployment rate is still close to 10% and payroll growth is still erratic at best. We need jobs now. The question is: who is going to create them?
America’s largest companies still aren’t hiring. In fact, many are still laying off workers just to meet quarterly earnings estimates and to appease shareholders. From November, 2008 through the end of the first quarter of 2010, the nation’s 500 largest companies laid off nearly 700,000 employees, according to data compiled by Forbes. In my area, the Pharma space, think Pfizer and Wyeth, Merck and Schering Plough, AstraZeneca and Sanofi-Aventis.
Even before the recession, established companies had shown little inclination to boost payrolls. From 1980 through 2005, the economy added roughly 40 million net jobs, with the overwhelming majority of them in companies that were five years old or younger, according to data provided by Robert Litan, vice president of research and policy at the Kauffman Foundation, and cited by Thomas Friedman recently in the New York Times.
This suggests that if we want to employ more workers, we’ll need more of the young start-ups that are more likely to hire them. That means creating or attracting more entrepreneurs willing to take the risks inherent in launching a new venture.
Leaders have an obligation to pitch in here. Our experience, wisdom, and access leave us uniquely positioned to mentor tomorrow’s “A ” players. We can do this in a variety of ways, from spearheading innovation programs to lobbying for reform in Washington. Our efforts will pay off not only in new jobs, but also in sustainable economic growth.
We know that certain schools are especially good at producing effective entrepreneurs. For example, as of February 2008, graduates of the Massachusetts Institute of Technology were responsible for founding 26,000 current companies, which created about 3.3 million jobs and brought in roughly $2 trillion in annual revenue, according to a report released by MIT and the Kauffman Foundation. (If those companies formed their own country, they would represent the 11th largest economy in the world, according to MIT Entrepreneurship Review.) Fordham and Ohio State as well, have major programs focused solely on entrepreneurship.
As leaders, we must take a more active role in our own local academic communities. We can leverage the nation’s network of colleges of universities to inspire and incubate new entrepreneurs. By reaching out to business schools and offering our services as guest lecturers and mentors, we can help guide more students interested in founding their own companies and show them how to run with their ideas.
The State University of New York, the largest public university system in the country, took a bold new step earlier this year when it unveiled a program designed to foster entrepreneurship. The “Power of SUNY” initiative will unite motivated students with experienced executives and help these future entrepreneurs lay the groundwork for funding new businesses.
Leaders must also take action outside academia. They should urge legislators to reform immigration laws so the U.S. can retain innovators from other countries. Under current laws, immigrants are about 30% more likely to start a new business than are non-immigrants, according to the Small Business Administration. Yet, as it stands, the H1B temporary work visa program allows foreigners to work in the U.S. for only six years—an artificial limit that restricts their ability to start new companies. Bill Gates was right last year when he said that immigration law should include “an exception for smart people.” I’d add “ambitious” as well.
Would-be entrepreneurs face yet another challenge: it’s unnecessarily difficult to register a new business in the United States. A study released last year by the World Bank suggests that countries with more obstacles to starting new businesses have a lower rate of new-business entry. By passing laws to scale back the red tape (and the fees) necessary to open up shop, the U.S. could encourage more entrepreneurs to strike out on their own.
Finally, leaders need to become more involved with entrepreneurs at the community level. We must provide young entrepreneurs with a strong support network where they can go for advice about funding and other start-up issues. Gary Whitehill is doing his part: he founded New York Entrepreneur Week, a local program that connects new innovators with experienced power players. This year, one of the week’s events included a training session on the 15-second pitch—an invaluable skill, particularly in New York.
Business leaders would be wise to increase their participation in academia, political advocacy, and/or community-based programs to give entrepreneurs a leg up. In the short term, they’ll help by putting more people to work. In the long term, they’ll make sure American innovation endures while they continue to build their proud personal legacies.