Gallup pollster Jim Clifton shares some
interesting global facts:
7b people
3b want to work
1.2b formal jobs exist
1.8b jobs shortfall
50+% deficit of full-time jobs
Scary information – to say the least!

Jim Clifton (Chairman of Gallup), in his newly released book “The Coming Job Wars” states that globally, politics will focus on this dilemma ….how to double the number of globally available good full-time and part-time formal jobs defined as 30-hour weekly employment paying living wages.

In the future the United States will compete, along with every country, state and local territory for these new jobs.

Clifton opines, since 70% of US GDP (Gross Domestic Product) is based on consumer spending any solution to job creation “requires consumer spending and any solution to job creation requires a lot of consumer spending or the GDP falls leading to less spending and higher unemployment”.

He concludes the US GDP growth rate is most important to job growth and, in the future, US GDP growth will come from global customer demand.

What’s needed today to remedy US and global unemployment according to Clifton, is a “transformational event that will cause a sudden extra ordinary surge of entrepreneurship and innovation just like the introduction of new technologies 30-years ago that saved America from the 1970’s recession” a technology transformation which created new global customer demand.

He further states the US has an oversupply of innovation and an undersupply of entrepreneurship; “innovation is not rare in America, neither is creativity, rather there is mass shortage – a significant undersupply – of successful business models”.

According to Clifton, “America’s job creation needs to focus on the connection between innovation and entrepreneurism – the person – the entrepreneur”.  He states that entrepreneurs are rare – “lots of people have good ideas, but most new businesses fail.  It’s not for the will or passion, but the lack of customers “and business knowhow.

While most Americans believe the US is run by “big business” in reality America is dominated by small and medium sized businesses – those with less than 500 employees which represent 99% of the proximate 6 million businesses with at least 1 employee.

Clifton believes it is here, these small to medium sized businesses along with entrepreneur formed new businesses is where job creation is most likely to occur.

He further opines that US GDP must grow at a minimum of 5% in order to create sufficient jobs to remedy present unemployment…this being double the near-term best future growth rate offered by leading economists.

This is how we get there –

1. Make Entrepreneurism a #1 Public Priority

The goal of economic policy must embrace the notion that private sector employment is most important.  Clifton opines that “if the overwhelming majority of Americans are not working outside of government jobs, America will go broke”.  He further states that “when GDP falls so does the amount of money government’s share [used] to fund services” 

The solution is to create new businesses which will create “new jobs” thus increasing GDP.

2. Seek Early Identification of Individual Entrepreneurial Potential

Researchers have documented a number of characteristics of people that start businesses.  The most common entrepreneurial traits include 1) parents that are entrepreneurs, 2) early age business involvements, 3) ability to take risk and 4)  an individual stick-to-itiveness personality trait.

According to researchers, these traits can be identified in youngsters aged 8-12 years when early education and mentoring can be provided to encourage them to consider entrepreneurship and business ownership as a chosen career choice.

The solution is to test and identify entrepreneurship personality traits of young people, most likely, as part of current K-12 student education testing programs.

3. Introduce Entrepreneurship as a Career Choice in Early Education

Today’s education system is designed to prepare youth for many types of careers, but often does not provided encouragement nor specific training for entrepreneurial careers.

There are a number of educational program designed to remedy this deficiency, however educational programs seldom integrate these into the classroom experience.

The solution is to redesign current K-12 educational programs to integrate entrepreneurship course content as a career choice equal to the emphasis given to college preparation course content.  

 4. Provide Our Youth Entrepreneurial Opportunities

A 2010 Kaufmann Foundation sponsored study survey shows that “interest in starting a business is consistent among tweens (eight- to 12-year-olds – 39 percent), teens (13- to 17-year-olds – 39 percent), and young adults (18- to 24-year-olds – 41 percent). Males (45 percent) are more likely than females (35 percent) to be attracted to business ownership.

The research concluded that “youth who personally know another entrepreneur have the strongest interest in starting their own businesses. Among youth who know an entrepreneur, almost half (46 percent) would like to start, or already have started, businesses, compared to only one-third (31 percent) of the young people who do not know a business owner”. (Underline added)

The importance of business owner contact and actual business experience contact is critical to shaping the personal characteristics and propensity for young people to pursue entrepreneurship and as career choice.

The solution is to provide business owner contact and business experience for young people – more Junior Achievement programs – more child operated lemon aid stands please.

5. Reformulate Government Assistance Programs to Reduce New Venture Risk

Starting up a business is costly.  Start-up costs many times include attorney, accounting, monthly banking fees, plus computer software purchases that can easily add up to $1,000 in the first year, more if you have partners in your business requiring partnership agreements, filing incorporation paperwork, etc.

All of these require immediate cash payments, always coming from the entrepreneur’s pocket.

Young businesses need cash, typically more than planned.  Elimination or deferral of startup expenses may be the difference between success and failure in the first year of operation.

The solution to encourage new business formation is to remove these start-up costs or allow payment of them upon the first anniversary of the business formation.

6. Incent Commercial Lenders and Investors to Accept New Business Start-up Risk

Lenders and investors are, by their very nature, adverse to accepting risk. They are trained to identify how and why a business can fail and to install loss prevention programs for any investment they make in a business.

While business risk aversion is a good thing the amount of risk lenders and investors are willing to assume varies.  Risk is measured by commercial lender interest charged for use of funds or investor dividends paid and resultant increased value of their investment in the business.

New business start-ups being “more risky” imply greater risk requiring higher interest charges, higher dividend payments and higher business ownership valuation to secure business start-up funding.

Since interest, dividends and capital gain on the sale of business interests are all taxable – federal, state and, where applicable, locally – after tax return on investment becomes the final measurement of the investment in a new start-up business.

The solution to expanding the amount of capital dedicated for new business start-ups is to reduce or eliminate taxation for a period of time for funds loaned or invested in new start-up businesses.

Last Thoughts

Today job creation is caused by a “rare breed of people” those of a certain state of mind having a business plan of action, a totally consuming idea resulting in unstoppable determination and optimism, an unwavering confidence in their personal business skills plus understanding of what customers really want.

These rare soles understand that customer relationships “trump” all business challenges and leads to identification of new products and services desired by customers and when provided by the business assures success.

It’s these “rare soles” that ultimately produce additional GDP, by creating innovative products and services for which new jobs will be required to produce and deliver the products and services to the customer.

If Clifton is correct, and a new transformational innovation is required to fill the global job deficit, it will most likely come from a start-up business idea.

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