Companies that want to overcome the shortage of skilled workers will have to measure themselves against a formidable rival in the coming years: self-employment.
“When workers have that option, they can demand more from their employers,” says Luke Pardue, an economist at Gusto, which runs payroll and provides benefits to 200,000 small businesses.
Many of those who started a business in 2021 were inspired by new business opportunities, with 25% of founders who launched in the last year citing this motive, according to a recent study by Gusto in its New Business Owner Survey. 36% of entrepreneurs said they started their business after voluntarily quitting their job.
“The hurdles to starting a business have never been so low,” says Pardue. “If you were to start a bakery or a restaurant, you would need to find a space to rent. That disappeared overnight. People can open a hair salon in their garage or a retail store that makes jewelry in their living room.”
The research offers an interesting window into the future of entrepreneurship in the post-pandemic environment. Here are some key trends:
Women of color and entrepreneurs are flocking to entrepreneurship. New business founders were more likely to be Black, Hispanic, and women in 2020 and 2021 than in 2019. In 2019, 28% of new business owners were women, up from 49% in 2021. And in 2019, black or African-American entrepreneurs accounted for less than 3% of entrepreneurs; by 2021, that share had tripled to 9%.
“If there’s one thing the pandemic has shown, it’s that their previous operating system didn’t work for a large part of America, especially for women and people of color who had different needs in their lives,” says Pardue.
Professional services are hot: 42% of new businesses created in 2021 were in the professional services sector – and 48% of entrepreneurs who left their job started a business in this sector.
The lack of supervision plays a role. 28% of women with children at home started a business because of their childcare needs.
Access to capital remains a challenge: While 11% of all new business owners were able to fund their startups with a personal business loan, compared to just 8% of Hispanic entrepreneurs and 6% of black entrepreneurs. The personal loan approval rate among Hispanic entrepreneurs was less than half that of white entrepreneurs. Against this backdrop, a third of black entrepreneurs and a quarter of Hispanic entrepreneurs took on a part-time job to help cover the cost of doing business.
LGBT businesses are thriving. Gusto estimates there are 1.4 million LGBT businesses that bring in $1.7 trillion each year.
With entrepreneurship attracting so many Americans — 5.4 million registered new businesses in 2021 alone — this increasingly popular employment option is likely to dominate the return-to-office debate for years to come. The debate will be moot if workers simply refuse to apply for jobs and instead create their own work.
“A company might want to see me back in the office – but I can be self-employed, work when I want and am not subject to the return-to-office mandate,” notes Pardue. “If there’s one overarching issue, it’s the pandemic, which has caused a collision between workers’ need for flexibility and the system’s demands of working on a 9-to-5 schedule and people are going to the office too to let.
“It’s one of the reasons we have 11 million job openings that we’ve never seen before,” he adds. “Entrepreneurship has been a great outlet for the economy, creating jobs and economic opportunity while satisfying the job needs of these ex-employees.”