More people are starting businesses now than ever before – and the reason may be that the opportunity cost, or what they have to give up in exchange for entrepreneurship, is lower than ever.
Data released by the US Census Bureau earlier this month shows that the total number of applications to start businesses reached 5.5 million last year.
This is half a million more applications than were submitted in 2022.
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Census Bureau data from the first four months of this year show that the startup boom is still going strong — from January to April, the number of new business applications reached more than 1.7 million.
Why are more people applying to start new businesses?
Columbia Business School Professor Angela Lee said The entrepreneur that the reason may be “the unprecedented number of layoffs by major tech companies in recent years, resulting in a large pool of talent freed up to pursue entrepreneurship.”
Columbia Business School professor Angela Lee (left) and Plum Alley Investments co-founder Andrea Turner Moffitt (right). Photo by Monica Schipper/Getty Images)
Lee, director of the Eugene Lang Center for Entrepreneurship, also noted that “entrepreneurship has historically been countercyclical because the opportunity cost of starting a company falls during a recession.”
Big tech companies have laid off employees in record numbers in recent years.
Tech layoffs last year affected 263,180 workers worldwide, according to the tracker Layoffs.fyi.
Amazon was fired mostly people (27,410) last year, but Meta (21,000), Google (12,115) and Microsoft (11,158) also contributed record numbers.
The unemployment rate has remained steady, in the range of 3.7% to 3.9% in the US over the past nine months, according to the last US Bureau of Labor Statistics job report.