New data shows the sweet spot for entrepreneurial success, and why young people need to rise up the ranks more quickly
There’s no question the domestic workforce is aging. According to recent data from the Bureau of Labor Statistics, the median age of the U.S. labor force was 42 years in 2016, up from 38 in 1996, and it’s projected to keep climbing.
But new research suggests that this trend could hamper business innovation on a long-term basis. Stanford Graduate School of Business professor Edward Lazear, with coauthors James Liang and Hui Wang from Peking University, find that having too many older workers in a society can hurt entrepreneurship. Their research appeared in the October 2018 issue of the Journal of Political Economy.
Lazear, the Davies Family Professor of Economics and the Morris Arnold and Nona Jean Cox Senior Fellow at the Hoover Institution, said younger societies offer more opportunities for workers to acquire valuable business skills earlier, which leads to greater rates of entrepreneurship.
“Workers in younger countries have more skills relevant for entrepreneurship at every age,” he said. “In younger societies, managers obtain the skills necessary to start their own businesses earlier, which leads to more overall business formation.”
DIVING INTO THE DATA
To conduct this research, researchers looked at two main variables: entrepreneurship within countries and median age of workers in those same spots.
To measure entrepreneurship, Lazear and colleagues referenced data from a survey tool dubbed the Global Entrepreneurship Monitor, which ranks entrepreneurship in 82 different countries. To measure age, the researchers called upon basic demographic data of workers within each of the nations in question.
Armed with these two sets of data, researchers cross-referenced them to look at the relationship between age and entrepreneurship or business formation.
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