“The global challenge ahead is unemployment. Most of the world [must] accelerate job creation. This means entrepreneurship.” These statements were recently made at an Entrepreneurship Celebration conference in the US.
Similar statements are made in many developing countries. In the Arab region, measures have been introduced or are being contemplated to support especially the youth to engage in entrepreneurial activity. These include training, microfinance and crowdfunding. The aim is not just to provide dynamism for the economy but good jobs.
The contribution of entrepreneurship to an economy cannot be overrated. Unless new ideas are tested and risks are taken, economic progress stalls. In a globalising world what matters is not how fast you move, but how fast you move relative to others.
However, it is less clear whether the youth are the best ones to capitalise on new ideas, because they have fewer financial resources. Entrepreneurs need experience (or intensive training) in some fundamental concepts and business practices. They also need connections and a supportive environment of mentorship. Unlike in the past where an entrepreneur might have known well what is going on in the local or even national economy, today markets are global and competition is instant.
A second reservation can be put this way: there are millions of physicists but few inventors. In other words, how many young people can and want to become entrepreneurs in a way that will make a dent on unemployment? This is a statistical question and can be answered indirectly by examining how many workers are wage employees today compared to the past. Focusing on the Arab countries, the share of employees in the workforce increased by 16 per cent between 1991 and 2013. To be an entrepreneur is to be a member of an endangered statistical species.
Third, assuming that more youth are prepared to put up with the hard and high risk associated with entrepreneurship, the impact on employment creation will be minimal. This is so especially in the GCC countries where only 5.9 per cent of men and a minuscule 2.6 per cent of women are employers or self-employed – even if one assumes that these small percentages reflect entrepreneurship and not business inherited from parents or licensed in one way or another by the state.
This is not meant to downplay the importance of entrepreneurship. For example, a gathering of aspiring start-up entrepreneurs in Alexandria, Egypt attracted more than 2,000 applications, of which 800 participants, including 200 women, were deemed to have interesting ideas. But Egypt is a country of many millions of people. And if this gathering were to be repeated, there is no guarantee that there would soon be another 2,000 applications as genuine as the original ones.
In any case, an entrepreneurial youth may be equally “intrapreneurial” after finding work as a company person. There is no reason innovation and creative thinking cannot take place and create change within organisations. In fact, given the many constraints talented Arab youth face, working for a company may be a preferred option for some time compared to navigating through the web of red tape to start a business.
The world has changed and is expected to continue changing fast. However, relatively little has changed or will change with respect to the youth: they will be as dynamic as they have always been, but naturally inexperienced. They will have many new ideas, but only a few will be those who will make the headlines.
Compare the youth with those above 50 years old. This group is experiencing an additional decade of longevity compared to their parents, are in relatively better health and, according to data in countries that keep track of them, they are the most active in creating businesses of their own – from micro to multimillion dollar ventures. Older entrepreneurs have managerial experience, access to funds and are increasingly eager to seek new opportunities amid the uncertainty of financial markets and some countries’ pensions systems. Data from the US-based Kauffman Foundation and the Global Entrepreneurship Monitor (a study prepared by a worldwide group of universities) show that, contrary to the traditional perception that entrepreneurship is a young person’s endeavour, people over 50 are the most entrepreneurial age group and seniors own businesses at a higher rate than any other demographic cohort.
The message for the Arab world is simple: support and let entrepreneurship flourish but, for some years to come, job creation is more likely to come from companies hiring intrapreneurial youth – and from those workers whose entrepreneurial impulse might have diminished through the decades yet never disappeared.
Professor Zafiris Tzannatos is an economist living in Beirut