Untapped Talent: Entrepreneurship can help address the youth unemployment challenge

What policies can help youth realise their ambitions to become entrepreneurs? Banner image: Shutterstock/WESTOCK PRODUCTIONS

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Young people show a high level of interest in entrepreneurship. Overall, about 45% of young people report that they would prefer to work as an entrepreneur rather than an employee, and 41% think it would be feasible. For university students the share is similar, with more than 40% planning to start a business within five years of graduation.

However, few young people are actively working on start-ups or managing businesses: only about 8% of people aged 18 to 30 years old in OECD countries were doing so between 2016 and 2020. This gap is quite a drop-off from the proportion who indicate a desire to be an entrepreneur, suggesting that there is substantial untapped entrepreneurial potential among youth.

There is substantial untapped entrepreneurial potential among youth people

Proportion of youth (18-30 years old) working on a new business start-up, 2016-20

Source: Global Entrepreneurship Monitor (2021), Special tabulations for the OECD; European Commission (2014), Entrepreneurship in the EU and Beyond, Flash Eurobaromter 354.

This gap has opened for several reasons. One is that young people probably overestimate their abilities in entrepreneurship due to a lack of experience in the labour market. However, youth also face greater obstacles in entrepreneurship than those with more work experience. Despite the growth in entrepreneurship education in schools, those under 30 years old are about 85% as likely as those over 50 years old to report that they have the skills and knowledge to start a business. In addition, young people typically have few savings or limited collateral to access loans.

Our economies are missing out on the full entrepreneurial potential of youth. Our new report The Missing Entrepreneurs 2021: Policies for Inclusive Entrepreneurship and Self-Employment estimates that there could be an additional 4 million youth entrepreneurs across OECD countries if young people were as active as the most active group, namely adult men of 30 to 49 years old. While not all of these “missing” youth will stay in entrepreneurship, the majority of those who engage in it do start their enterprises.  Moreover, young people learn from their entrepreneurial projects and find it easier to enter the labour market even if they stop their projects. And through the process of entrepreneurship, young people introduce many new ideas to the economy.

Unlocking their potential now is critical as we face yet another youth unemployment crisis. Youth unemployment increased from about 12% in January 2020 to 19% in May 2020 in the OECD area as a result of the COVID-19 pandemic—and the youth unemployment rate remains high.

Entrepreneurship can be part of the policy response, and there are many examples of what governments can do. The national Youth Entrepreneurship Programme in Hungary has demonstrated strong results, particularly following the financial crisis. A new evaluation shows that 6,500 youth were supported in business creation since 2014 and that targets have been exceeded. Participants are offered entrepreneurship training, mentoring and business counselling, and in a second step youth can apply for financial support. This staged approach helps to focus support on those with the greatest motivations and chances for success.

For more information on youth entrepreneurship trends and policies, please see the new Missing Entrepreneurs 2021 report. This report was prepared by the OECD and EU as part of a wider collaboration on inclusive entrepreneurship that includes the Better Entrepreneurship Policy Tool, policy briefs and more.

Read the OECD's report The Missing Entrepreneurs 2021: Policies for Inclusive Entrepreneurship and Self-Employment, published on 29 November 2021

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David Halabisky

Project Co-ordinator, Centre for Entrepreneurship, SMEs, Regions and Cities, OECD

David Halabisky is a project co-ordinator in the OECD Centre for Entrepreneurship, SMEs, Regions and Cities. He is currently working on several projects related to entrepreneurship policy, including a multi-year project on inclusive entrepreneurship and is the main author of the Missing Entrepreneurs reports. Prior to joining the OECD, David worked for more than a decade in the Canadian Public Service where he worked on SME policy at the Federal Ministries of Industry, Finance and Labour. Mr. Halabisky has won several awards during his career, including a Best Paper Prize from the Administrative Sciences Association of Canada. He has degrees in economics from the University of British Columbia and McMaster University.