Demographic and economic shifts are giving rise to new forms of business development and new types of working relationships between owners, employees, contractors, and other businesses. These changes require a reassessment of what it means to prepare a workforce, support entrepreneurship, and provide a business-friendly economic climate. As a national leader in innovation, including high tech businesses and social enterprises, California has a natural advantage in finding a successful path forward.
Millennials are Changing the Workplace
As Millennials have become the largest cohort in the workplace, major changes are also taking place in technology, market access, and geopolitics. Pew Research Center estimates that there are 76 million Millennials in the US, using the definition of individuals born between 1981 and 1998. In 2014, Millennials surpassed GenXers (age 35 to 50) as representing the largest cohort of the U.S.. labor force. Gen Xers, considered to be born between 1965 and 1980, only overtook the Baby Boomers as the largest cohort in the labor force in 2012. These rapid generational shifts are placing unique challenges on business, including a rise in the number of Boomers seeking to sell their businesses and the requirements for training and upskilling of incumbent workers. The California Employment Development Department estimates that over half of job openings between 2014 and 2024 will be for replacement jobs.
Changes in the workplace are not just generational. According to the Pew Research Institute, approximately 44% of Millennials are of a race or ethnicity other than non-Hispanic white and 20% of Millennials have at least one immigrant parent. Millennials have a number of other distinctions from prior generations, including the most obvious differences of having a closer relationship and understanding of electronics and information technologies. Millennials have grown up in an online and socially networked environment and are reported to having the highest average number of Facebook friends among all working age individuals, as one example.
Contrary to public perception, however, research by Pew found that Millennials are just as likely to stick with their employers as their older counterparts during the same age period. Among the college educated, Millennials are reported to remain with employers for even longer time periods. More similar to the education levels of Boomers, Millennials have a higher level of education than GenXers, with 38% of Millennial men and 46% of Millennial women having at least a bachelor's degree.
Millennials are very interested in new forms of entrepreneurship, which often include social components. According to one study, 94% of Millennials are interested in putting their skills to work to benefit a cause and more than 50% wanted their employer to have more programs engineered for giving back. In California, laws have been adapted to authorize benefit corporations and worker cooperative, as well as nonprofit social enterprises.
Another report stated that 88% of college students believe that entrepreneurship education is vital and 54% of the Millennials planned to start their own business in 2016. Millennials, however, face many challenges to reaching their employment and entrepreneurship goals. College debt appears to be a leading impediment for would-be entrepreneurs, as is the lack of entrepreneurship resources addressing the unique needs Millennials. One study reported that 74% of college students having no access to entrepreneurship resources on campus. Of those Millennials who did start their own business, 23% say they started a business as a result of employment.
The Rise of New Forms of Business and Diversity of Ownership
Driven by economic and social conditions and priorities, the 21st Century has seen plethora of new and innovative business models. While some of the business models are not entirely new, like cooperatives, the ways in which the model is being applied has evolved to reflect current market realities and owner/worker interests. Entrepreneurship has been embraced by nonprofits, crafts people, and social enterprises. Another key difference in today's emerging economy is the diversity of ownership, including by gender and race and ethnicity.
In August 2015, the U.S.. Department of Census published initial data from the 2012 Survey of Business Owners.The last survey was made in 2007.While the data significantly trails real-time, it is the most comprehensive source for tracking trends in entrepreneurship, including ownership by women and individuals of color.
Chart 2, shows selected data from the 2012 Survey of Small Business Owners. Among other findings, the data shows a 27.5% increase in women-owned businesses between 2007 and 2012, as compared to a 7.9% increase in businesses owned by men and a -45.8% decrease in firms owned equally by men and women. Women-owned businesses also experienced the greatest increase in the number of people they employed and wages paid.
Chart 2 - Gender Differences in U.S. Businesses | |||
| Percent Change 2007 to 2012 Women-Owned Firms | Percent of Change 2007 to 2012 Man and Women-Owned Firms | Percent Change 2007 to 2012 Men-Owned Firms |
U.S.. Firms | 27.5% | -45.8% | 7.9% |
Receipts from all firms (employer and nonemployer) | 35.1% | 6.7% | 33.8% |
Employer Firms | 15.7% | -25.8% | 5.3% |
Receipts from Employer Firms | 35.4% | 13.2% | 34.9% |
Employment | 19.4% | -11.9% | 11.5% |
Payroll | 35.3% | -0.9% | 25.8% |
Source: National Women's Business Council |
States with the highest percentage of women-owned firms included District of Columbia, Georgia, Maryland, New Mexico, and Florida. Delaware, Alaska, North Dakota, Maine, and New Jersey were the states where women-owned firms collected the highest amount of receipts.
Women entrepreneurs, according to the Ewing Marion Kauffman Foundation, have unique skill sets, which both set them apart from other business owners and make them successful entrepreneurs. Among other things, the Kauffman Foundation states that women entrepreneurs have a more nuanced understanding of businesses risk/reward profile. Women are more comfortable with financial risks, but more sensitive about risks that may seem foolhardy. The Kauffman Foundation also believes that there is a correlation between a rise in women entrepreneurs and increased business returns and payout ratios. Chart 3 shows additional information from the 2012 Survey of Business Owners relative to race and ethnicity. The largest percentage changes in business ownership were by Hispanic women, where the number of firms grew by 87.3% between 2007 and from 20012. As a comparison, male Hispanic-owned firms grew by 39.3%.
Chart 3 - Comparison of Business Growth by Race, Ethnicity, and Veterans | |
Business Ownership | Percent Change 2007 to 2012 Number of all Firms |
Asian American Women | 44.3% |
Asian American Men | 25.7% |
Black Women | 67.5% |
Black Men | 18.8% |
Hispanic Women | 87.3% |
Hispanic Men | 39.3% |
White Women | 10.1% |
Veteran Women | 29.6% |
Veteran Men | 7.7% |
Source: 2012 Survey of Business Owners |
In California, business ownership by women was up 13.7%, which was the highest among states with the largest number of women-owned businesses. In Texas, women-owned businesses were up 8.7%; Florida, 8.18%; New York, 7.3%; and Illinois, 4.23%. California also had the highest number of Hispanic and Asian American women-owned firms. For businesses owned by Black women, Georgia had the largest number of firms, California had the fifth largest number.
Thought Leadership on the Future of Work
The Assembly Committee on Jobs, Economic Development, and the Economy we will be sharing key reports and articles. Suggestions for additional reports are always welcome. Please make referrals to: toni.symonds@asm.ca.gov