WASHINGTON–A lackluster recovery for start-up firms from the Great Recession has put a strain on an already-fragile U.S. economy, threatening the job market and productivity, and contributing to greater income inequality, according to a Senate hearing Wednesday.
Facing a dwindling entrepreneurship landscape, incubators and research group leaders urged lawmakers to help startups get more access to capital, ease regulatory barriers, reform immigration policies and get rid of unnecessary occupational licensing.
The 30-year “startup deficit” — the decline of new companies share as a percentage of all firms and the workforce employed — feed into a lack of economic dynamism in a record low interest-rate environment.
The financial crisis beginning in 2008 took a toll on startups that has lingered even as the economy recovery slowly advances. Unlike dynamic recoveries following the 1991 and 2001 recessions, the U.S. only added 166,500 new enterprises between 2010 and 2014. That’s a nearly 60% decrease from the previous two recoveries, according to Economic Innovation Group, a Washington-based economic research and advocacy organization.
Economic Innovation Group research shows a startup environment suffering from less access to capital, decreased housing wealth and growing student debt among millennials in their 20s and early 30s.
Policymakers have “the duty to assure entrepreneurs across the country access to the recourses necessary to start and grow their businesses free from unnecessary impediments from the government including overregulation,” Sen. David Vitter, a Louisiana Republican who is chairman of the Senate Small Business and Entrepreneurship Committee, said during the Wednesday meeting.
Underperformance in the startup sector hurts productivity, with each hour worked producing less than what should be reasonably expected, according to John Lettieri, co-founder of Economic Innovation Group. This low productivity, as Federal Reserve Chairwoman Janet Yellen said last week on the Capitol Hill, could hamper future wage growth.
Photo at top: Sen. David Vitter, center, at a Senate hearing on entrepreneurship. (Harvard Zhang/Medill News Service)
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