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Entrepreneurship: an avenue back to work for all?

09/09/2015 Two female entrepreneurs in front of their shop

Entrepreneurship helps to create jobs and develop skills, and to include the unemployed and disadvantaged in society and the economy.

With its contribution to growth and job creation, entrepreneurship and self-employment hold a potential for all groups of the population.

Nevertheless, the share of self-employment in total employment differs strongly across population groups. Let's look at the graph below: while the overall share is close to 15%, shares are clearly higher for men and older people, reaching even close to 23% for older male nationals (click to enlarge).

Graph: Share of self-employment in overall employment

At the same time, three groups can be identified as under-represented among the self-employed: women, non-EU nationals, and young people.  A similar divide can be seen when looking at the share of self-employed with employees, i.e. those that have grown beyond the one-person firm or unit and whom could be considered as 'genuine' entrepreneurs. Women, non-EU nationals, and young people have more difficulty in obtaining finance, often lack administrative skills, and typically have less business networks, entrepreneurial skills, and experience.

When establishing and running a business, women face more difficulties than men, mainly in access to finance, training, networking, and in reconciling business and family.

While migrants have higher business creation rates than the rest of the population, they also fail more often due to a lack of information, knowledge, and language skills. Migrant entrepreneurs can in particular have difficulties understanding regulatory requirements and are more likely to be forced to rely on non-bank and informal finance.

Young people express great interest in starting businesses, but often do not take this forward concretely. Young people experience greater difficulty raising external finance, given their lack of savings and collateral, and often lack skills to run a business.

Among people over 40 years old, the share of self-employment in total employment increases with age. However, in view of a decreasing employment rate with age, some entrepreneurial potential is lost among older people. Older people often have high levels of technical skills and access to finance. Engaging them in both business creation and in supporting new and existing entrepreneurs could maximise the wealth of experience they possess, cultivate intergenerational learning, and ensure knowledge transfer.

The joint analysis by the OECD and the European Commission finds that integrated packages of support for (potential) entrepreneurs are most effective. Such packages combine tools for facilitating access to finance (such as microfinance) with targeted business development services to address potential skills shortages, including coaching and mentoring.

Becoming self-employed can be an entrepreneurial avenue back to work for some of those made unemployed by the crisis. Promoting entrepreneurial attitude and skills is also of high relevance in the context of the current long-term and youth unemployment situation.

Author: G. Lejeune is a senior expert in the unit of Sectorial Employment Challenges, Youth Employment and Entrepreneurship of DG EMPL.

The views expressed in this article are those of the author and do not necessarily reflect the official opinion of the European Union.

Editor's note: this article is part of a regular series called "Evidence in focus", which will put the spotlight on key findings from past and on-going research at DG EMPL.

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