How young entrepreneurs should be supported: what assistance should governments provide?

Bienkowska 2018

Ms Elżbieta Bieńkowska, Member designate of the EC in charge of Internal Market, Industry, Entrepreneurship and SMEs. © European Union , 2014 / Source: EC – Audiovisual Service / Photo: Etienne Ansotte.

This article was exclusively written for the Sting by Mr Nikita Polukeev is a final year student at the University of Westminster. Mr Polukeev is affiliated to the European Confederation of Junior Enterprises (JADE). JADE is a cordial partner of The European Sting. The opinion expressed in this piece belongs to the writer and does not necessarily reflect The European Sting’s one.

In 2016, OECD reported that the average of young unemployed people was 13%, meaning that one-in-ten young people in the EU could not find employment. However, the current state will be completely different if we look at the comparison of the EU countries in detail. For instance, in the Southern part of the union, countries like Greece and Spain accounted for 47% and 45% of total youth unemployment respectively as shown in Figure 1.

Figure 1

(OECD, 2017)

According to this contrasting data, young people of Europe are struggling to find the job and join the workforce (OECD, 2017). This represents an economic challenge as being unemployed for the younger generations might be a catalyst for poorer wages and future unemployment (Blanchflower and Oswald, 1998).

There is a potential solution to integrating young people into the labour market through energizing the concept of young entrepreneurship. In other words, society and government should contribute their efforts to support and increase the number of young people, who are “interested in politics, giving to charities, extroverted, and more liberal in their political ideology” in order to reduce youth unemployment rates (van Ryzin et al, 2010, p.136).

Statistically, these are in 15-24 age group, which include NEETs (not in education, employment or training) and full-time enrolled students. There are societal merits such as job creation, innovation and market contestability to this concept (OECD, 2017).

It is widely acknowledged that a market failure of imperfect information along with the shortage of financial, social and human capital resulted in the poor participation of the young population in the entrepreneurial field. In response, the market provides youth enterprise assistance that can be categorised into 3 groups: “enterprise education”, “soft” support, “hard” support (OECD, 2017). To start with, “enterprise education” approach concentrates on providing essential skills, identifying gaps in the market, business planning and testing. Universities and Voluntary organisations are the main suppliers of this support. A good example of an education programme is Junior Achievement Europe program.

JA Start-Up Program for universities that allows students to come up with an idea of a real enterprise, deal with the financial schemes and experience a multi-national competition. Currently, this programme is established in 40 countries and involves more than 3.5 million students. The recent evaluation showed that participants of this program are three-six times more likely to start their own business in the future (Jaeurope.org, 2017).

Another source of entrepreneurial support available for the young people is advisors and mentors. This is a part of “soft” approach. The focus is to assist in developing networking competencies, provide relative advice and effectively transit young people into self-employment (OECD, 2017). A company of Shell offers Livewire International program, an area-specific business development support.

Additionally, young people become responsible for producing an investor-ready plan, experience finance management and opportunity to widen their professional network. It operates in more than 15 countries with 9.2 million of participants that benefited from this program (Shell.co.uk, 2017).

Furthermore, the “hard” support provides micro-financing in the form of funding through third-party policy tools. Both “soft” and “hard” approaches offer pre-and post- start-up support. The rationale for this support is to help young entrepreneurs to overcome the lack of financial capital required for the sustainable business development.

There are at least 57 youth charity funding grants available for the Europeans. One of the most rewarding is European Youth Foundation Program (Welcomeurope, 2017). This fund provides young people, that have the vision to promote peace and closer-cooperation between European states, with the financial and educational support (Foundation, 2017).

To sum up, issue of high youth unemployment is unequally spread among the Euro member states. The nature of this issue is arising from the limitations of public support of countries with high rates and market failure of imperfect information. OECD conducted an evaluative research on three main support approaches discussed above, evidence of which suggest that the “enterprise education” encourages young entrepreneurs’ intentions development for opening their start-ups more than the “soft” and “hard” types of support. This is due to the evaluation difficulties of those programs (OECD, 2017).

However, there is another way of intervening the market failure of imperfect information for the young people. This is the public policy interventions – Active Labour Market Policies (ALMP’). They represent a considerable value for the policymakers, because of positive externalities of integrating young entrepreneurs to the labour force (OECD, 2017). For instance, in 2013 Italian Government introduced the National Start-up initiative, which aims to simplify the procedures and start-up regulations for technology-based entrepreneurs. Also, it provides help with exporting and web resource to promote the idea to the investors (Oecd.org, 2017).

Moreover, 40% of young people want to be self-employed (Euro Flashbarometer, 2011). There is a room for the extra state intervention for helping out students and those in NEETs’ groups as the number of young unemployed is still very high. Firstly, many of public policies are not focused on young entrepreneurs only, so they cover a wide range of unemployed groups. There should be developed unique programs with “push” (self-employment is the only solution for these people) and “pull” (identified opportunity) factors in mind. Secondly, OECD (2017) assume that the typical start-up will be opened in tertiary sectors rather than secondary as it has low entry barriers and low capital requirements.

But those are the riskiest ones as the degree of competition will make those enterprises transitory. According to these assumptions and data, EU government should focus on the promotion of technological, niche, long-haul sustaining business ideas and support in their development. Additionally, in that, the self-employed can find challenging to return to employment after the business failure (Bruce and Schuetze, 2004). Meaning that there should be schemes for those individuals guaranteeing them future employment, so they can make risky decisions. Thirdly, statistics state that information provision can be the reason for the high number of start-up failures. Consequently, the government should create the pilot projects which will be testing the best opportunities to support the young entrepreneurs.

References  

Blanchflower, D. and Oswald, A.J. (1998) Entrepreneurship and the Youth Labour Market Problem: A Report for the OECD, OECD: Paris.

Bruce D and Schuetze HJ. (2004) The labour market consequences of experience in self-employment. Labour Economics 11: 575-598.

Ec.europa.eu. (2017). European semester thematic factsheet active labour market policies. [online] Available at: https://ec.europa.eu/info/sites/info/files/european-semester_thematic-factsheet_active-labour-market-policies_en.pdf [Accessed 7 Dec. 2017].

Euro Flashbarometer (2011a) Youth on the move, Gallop.

Foundation, E. (2017). Funding and grants Council of Europe EYF. [online] European Youth Foundation. Available at: https://www.coe.int/en/web/european-youth-foundation/home [Accessed 7 Dec. 2017].

Jaeurope.org. (2017) [online] Available at: http://jaeurope.org/index.php?option=com_attachments&task=download&id=352:JA-Europe-factsheet-2016 [Accessed 7 Dec. 2017].

Oecd.org. (2017). Youth entrepreneurship. [online] Available at: https://www.oecd.org/cfe/leed/youth_bp_finalt.pdf [Accessed 8 Dec. 2017].

Oecd.org. (2017). Youth Entrepreneurship Report. [online] Available at: https://www.oecd.org/employment/leed/Italy-Youth-Entrepreneurship-Report-FINAL.pdf [Accessed 4 Dec. 2017].

Riahi, S. (2017). Youth Entrepreneurship: Ottawa's Portfolio in Talent Development. [online] Timreview.ca. Available at: https://timreview.ca/article/394 [Accessed 5 Dec. 2017].

Shell.co.uk. (2017). Shell LiveWIRE. [online] Available at: http://www.shell.co.uk/sustainability/society/encouraging-enterprise/shell-livewire.html [Accessed 5 Dec. 2017].

van Ryzin GG, Grossman S, DiPadova-Stocks L, et al. (2009) Portrait of the Social Entrepreneur: Statistical Evidence from a US Panel. Voluntas 20: 129-140.

Welcomeurope.com. (2017). European funding programmes. [online] Available at: https://www.welcomeurope.com/subvention-europenne/telecharger+180.html [Accessed 6 Dec. 2017].

About the author

Nikita Polukeev is a final year student at the University of Westminster, who wants to bind his 3-5 years of career with the consultancy industry. He also wishes to start his political career in the Russian Government at an age of 45-50 years. Nikita has a huge interest in Economics and International Relations, which are in fact the main topics of his study pathway. He is currently an International Development Senior Consultant at WBC where he actively contributes to regular enlargement operations and where he constantly proves his high involvement in international activities.

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Featured Stings

Africa’s inspiring innovators show what the future could hold

Parliaments can be pillars of democracy and defenders of human rights, says UN chief on International Day

EU budget: Reinforcing Europe’s cultural and creative sectors

G20 LIVE: “United States and Turkey stand in solidarity with France and its people in handing the perpetrators of this crime and bringing them to justice”, US President Barack Obama underlines from G20 in Antalya Turkey

Security Council renews mandates of UN force monitoring separation area between Israel and Syria; AU-UN hybrid mission in Darfur

Clamp down on illegal trade in pets, urge Public Health Committee MEPs

High-technology manufacturing saves the EU industry

My unlimited China

Mandela, ‘true symbol of human greatness’, celebrated on centenary of his birth

The IMF sees Brexit’s ‘substantial impact’ while the world’s economy holds its breath

EU-Turkey deal on migrants kicked off but to who’s interest?

Happens now in Brussels: Green Week sets the EU and global climate policy agenda

Indonesia’s imams are joining the fight against plastic bags

Afghanistan: UN mission condemns deadly attack near Kabul airport

Climate change: Direct and indirect impacts on health

We need greater protection for our oceans. We can’t let politics stand in the way

GSMA Announces Latest Event Updates for 2018 “Mobile World Congress Americas, in Partnership with CTIA”

Use “blockchain” model to cut small firms’ costs and empower citizens, urge MEPs

2014 will bring more European Union for the big guys and less for the weak

Nicaragua: MEPs condemn brutal repression and demand elections

Vulnerable young people must not be blamed & stigmatised for violent radicalisation

A week to decide if the EU is to have a Banking Union

The mother of all fights about inflation, growth and banks

EU lawmakers vote to reintroduce visas for Americans over “reciprocity principle”

US – Russia bargain on Syria, Ukraine but EU kept out

Brain Drain: Follow your dreams, wherever they might take you

For Youth Rights: steps forward for better protection.

The European Union’s Balkan Double Standard

Alice in Colombia

Fleeing Venezuela: MEPs to probe humanitarian conditions in Colombia and Brazil

Nature is our strongest ally in ensuring global water security

Is ECB helping Germany to buy cheaply the rest of Europe?

Volkswagen getting away with it in Europe

The Chinese film boom luring Hollywood’s stars

Robot inventors are on the rise. But are they welcomed by the patent system?

This AI is working with a fleet of drones to help us fight ocean plastic

Time is running out to protect Africa’s forests

Why the ECB suddenly decided to flood banks with money?

IMF: How can Eurozone avoid stagnation

G20: Less growth, more austerity for developing countries

The Commission accused of tolerating corruption and fraud in taxation

Managers’ pay under fire

Youth Forum calls on Parliament to ease entry into Europe for young people

Commission’s action plan: financial world mandatory links to environmental targets

Why growth is now a one way road for Eurozone

Artificial Intelligence and Machine Learning: “Am I a real Boy?”

Mixed news about the Eurozone economy

Germany and Europe prepare for Trump’s America

Galileo and EGNOS programmes back in orbit powered with €70 billion

The battle for the 2016 EU Budget to shake the Union; Commission and Parliament vs. Germany

Summer pause gives time to rethink Eurozone’s problems

Dangers of poor quality health care revealed ‘in all countries’: WHO report

Is the ECB enforcing the will of the big Eurozone member states on the small? Can the euro area live with that?

Trump and Brexit: After the social whys the political whereto

Germany readies to pay for the Brexit gap in EU finance

Sudzha gas metering station at Russian-Ukrainian border (Copyright: Gazprom, 2015 / Gazprom’s website, Media)

Gazprom starts suspending gas contracts with Ukraine as Brussels fears limited transit to Europe

EU revengefully shows no mercy to Cameron by demanding a fast and sloppy Brexit now

The US may be “open” to reviving TTIP, while the EU designs the future of trade with China

India’s Largest Entrepreneurship Event is Back! (23-24th August 2016)

More Stings?

Speak your Mind Here

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

w

Connecting to %s