The opportunity cost of starting a business has never been lower, and the number of new business applications is at an all-time high. The U.S. Census Bureau reported 5.5 million applications to start businesses in 2021, a half million more than the previous year. This trend is continuing as the number of new business applications reached over 1.7 million from January through April this year.
The increase in entrepreneurship could be attributed to several factors, including layoffs from big tech companies in recent years and a changing landscape of work that makes it more feasible for individuals to take the leap into entrepreneurship.
Columbia Business School professor Angela Lee notes that entrepreneurship historically increases during a recession as the opportunity cost to start a company decreases. Big tech companies have seen record layoffs, with 263,180 employees globally affected by tech layoffs last year, with major companies like Amazon, Meta, Google, and Microsoft contributing to these numbers.
Despite stable unemployment rates in the 3.7% to 3.9% range over the past nine months in the U.S., more people are turning towards entrepreneurship as an opportunity to start their own businesses and pursue their passions.
As such, entrepreneurs are taking advantage of this low opportunity cost and starting businesses at an unprecedented rate.
In conclusion, while unemployment rates remain stable in the U.S., more people are turning towards entrepreneurship as an alternative way to start their own businesses and pursue their passions. With the low opportunity cost of starting a business and increasing talent pool available, it’s likely that this trend will continue for some time to come.
