KfW Research: Desire for self-employment at record low in Germany

• Only 25% of the workforce would still like to work for themselves
• Attractive job market opportunities and demographic trends lead to waning entrepreneurial spirit
• A ray of hope is the recently increasing desire to launch start-ups among younger people

In Germany, it is not just the number of start-ups that has been declining for many years, but also the general desire for self-employment. As a recent analysis by KfW Research on entrepreneurial spirit shows, in 2018 only 25% of the working-age population would have liked to work for themselves. The desire for self-employment in in Germany has thus reached an all-time low. In 2000, the figure was still 45%, before declining first gradually and then significantly following the financial crisis.

The main reason for the drop in the number of start-ups is the now unusually long upswing in the job market. Lots of job opportunities at attractive conditions make self-employment less appealing. This is compounded by the dwindling entrepreneurial spirit, which is also affected by demographic trends. The interest in setting up a business usually decreases with age due to the fact that family responsibilities become often stronger and financial dependence on an employer generally increases. In Germany, where society is ageing consistent with current trends, this is reflected in a steady decline in interest in starting a business. A ray of hope for the entrepreneurial spirit in this country is thus also the development amongst young people. Their desire to become self-employed has grown stronger again in the past two years: in 2018, free of practical constraints, a good third of people under the age of 30 would have opted for self-employment.

In addition, the financial crisis has evidently had a negative impact on people's attitudes towards self-employment – not only in Germany, but in many European countries and also in the USA. Fear of failure is likely to play a role here, mainly driven by concerns about financial pressures, but also by general fears of crises. In 2015, the economic and financial crisis was cited as the second most frequent reason for fear of failure worldwide.

“The decline in start-up activity in Germany has a lot to do with the very good development of the job market, coupled with a waning entrepreneurial spirit in society as a whole,” says Dr Georg Metzger, start-up expert at KfW Research. “However, the fact that more young people can imagine becoming self-employed again is a positive sign. This development should be encouraged. The Federal Government's 'Entrepreneurship in Schools' initiative is the right approach. It is also important to encourage women, who tend to be less interested in launching businesses. Germany needs more younger entrepreneurs to stay innovative and internationally competitive. And not least of all because thousands of medium-sized companies will need successors in the coming years. We cannot afford to squander promising potential.”

The current KfW analysis on the dwindling entrepreneurial spirit can be found at: www.kfw.de/fokus

About the data:
KfW Research's current analysis of “entrepreneurial spirit” is based on the KfW Start-up Monitor 2019, a representative telephone survey of the population about entrepreneurial activity in Germany that has been conducted annually since 2000. Represented in the survey are people residing in Germany between the ages of 18 and 67 with sufficient knowledge of German. Around 50,000 people living in Germany are interviewed for each survey. A great deal of information is collected on the entrepreneurs and their projects as well as on the continuation of the start-up projects in the particularly critical first three years of the company. The KfW Start-up Monitor thus provides a comprehensive picture of start-up activity in Germany. Further information: www.kfw.de/gruendungsmonitor