Recession Creates More One-Person Businesses, Less Employers

Mar 8th, 2011 | By | Category: Business and Finance

The recession has sparked a 15-year-high surge in small business start-ups, according to a study released by the Kauffman Foundation Monday. Most of these are one-person businesses rather than companies that employ others, the study found.

According to the “Kauffman Index of Entrepreneurial Activity,” which measures new business creation in the United States, 0.34 percent of American adults created a business per month in 2010, totaling 565,000 new businesses. This rate continued a trend from 2009 and represents the entrepreneurship level over the past 15 years.

Meanwhile, however, the quarterly employer firm rate, measuring the number of businesses that have new employees, dropped from 0.13 percent in 2007 to 0.10 percent in 2010.

Carl Schramm, president and CEO of the Kauffman Foundation, described these results as indicating that many start-up business owners prefer “to remain self-employed or to avoid assuming the economic responsibility of hiring employees.”

Entrepreneurship rates were highest among Latinos and Asians, among 35- to 44-year-olds, and in Nevada, Georgia, California, Louisiana, and Colorado. Entrepreneurial activity among immigrants increased substantially, from 0.51 percent in 2009 to 0.62 percent in 2010.

The Kaufmann Index bases its conclusions on drawing data from the monthly Current Population Survey (CPS), conducted by the US Bureau of the Census and the Bureau of Labor Statistics. The index also considers separate estimates for specific demographic groups, states, and select metropolitan statistical areas (MSAs).

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