Coronavirus crisis has dented young adults’ entrepreneurial spirit

• Only 24% of employable persons want to be their own bosses
• Serious setback for entrepreneurship among under-30s
• Weak entrepreneurial spirit puts future viability of the economy at risk

A new analysis conducted by KfW Research on the basis of the KfW Entrepreneurship Monitor reveals that the coronavirus crisis has reduced people’s drive to start a business. Only 24% (2019: 26%) of employable persons aged 18 to 64 would choose self-employment as a means of earning an income irrespective of their current situation, while 74% prefer salaried employment (+3 percentage points). The entrepreneurial spirit has weakened most in the generation of under-30s. Only 29% of young adults would consider starting their own business, ten percentage points fewer than in the previous year.

As recently as in 2019, the entrepreneurial spirit of young adults had experienced a boost from students, 46% of whom preferred self-employment. But it is precisely their interest in self-employment that has now dropped again. This may have to do with the fact that practically all teaching activities at universities and higher education centres were taking place online. That put great pressure on students – perhaps too much to keep their entrepreneurial spirit alive. The hope remains that the return to more face-to-face teaching will rekindle that spirit.

In the past, preference for self-employment always developed roughly at a similar rate between men and women. That was also the case when it declined in 2020. However, because women are generally less likely to prefer self-employment, they have experienced a relatively steeper decline. Men were thus around 1.8 times more likely to prefer self-employment in 2020 than women – the highest ratio ever recorded. This is probably because the pandemic has put more pressure on women. They continue to perform most of the domestic and caring work, which was significantly more intense last year as a result of homeschooling and closures of child daycare centres.

“The coronavirus crisis and the economic and personal pressures from the pandemic have put a further dampener on the waning entrepreneurial spirit in Germany”, summarised Dr Fritzi Köhler-Geib, Chief Economist of KfW. “The share of entrepreneurially minded people in the labour force has already nearly halved since the year 2000. This is no doubt the result of the record-breaking labour market boom since the mid-2000s, but it is bad news for the economy. Personal responsibility and initiative are declining, structures are becoming encrusted because pressure to adapt is decreasing, there is less flexible expertise, and fewer skilled young people are available for upcoming business successions. This calls for one thing only: Entrepreneurial spirit must be rekindled systematically, because the future viability of the German economy will suffer unless it has entrepreneurs.”

The current analysis can be retrieved at
www.kfw.de/kompakt