In the next decade, one billion more young people will enter the job market, and in order to keep pace with this growing workforce, the global economy will need to create 600 million jobs in the next 10 years.
That works out to 5 million jobs a month. Compounding these figures, one third of young people globally are not currently in employment, education, or training and nearly 85% live in developing and insecure economies.
While no single panacea exists to address these enormous challenges, in my organization we have come to realize that providing more substantial support to young job creators could make a significant impact on job growth in the years to come. This approach is risky. We don’t yet have data to prove that it will work or how much growth will result. But the numbers suggest that taking this risk is an imperative to make progress with youth employment.
Recently I had the opportunity to speak with several exceptionally motivated twenty-something entrepreneurs from Democratic Republic of Congo, Tunisia and Senegal - people who have created rapidly expanding, forward-looking enterprises. All have the capacity to create hundreds or thousands of jobs over their careers and to create a ripple effect in their countries.
Based on those conversations, I have four recommendations for governments grappling with increasing job creation, and their international supporters:
Modify taxation structures and regulatory environments to encourage the growth of business led by young people. The young entrepreneurs I spoke with all mentioned the punitive taxation structure they experience.
One explained: “When you start a business, it takes an average of three years to break even. But, you have to pay 25% tax on your revenue (not profit) from the first year.” Another spoke of “both the bureaucracy as well as the culture of lethargy, indifference, and corruption” at mid-levels in the government institutions that he must navigate in expanding his alternative energy provision enterprise.
These tax, regulatory, and bureaucratic challenges are keeping many young entrepreneurs in the informal, and unregistered, economy. They cannot get access to financing and other support they need to grow their businesses and create more jobs.
Create and support more incubators and accelerators. Effective business incubators and accelerators are an imperative. (Business incubators focus on helping start-ups succeed and grow; accelerators are generally focused on businesses that are established, but need help expanding.) They can not only help budding entrepreneurs navigate complex regulations, institutions, and identify sources of capital, they also can provide low-cost space, access to networks, mentors, and supportive peers.
All the entrepreneurs I spoke with stressed that young people have great ideas, but don’t have the support and opportunities that they need to succeed.
“There are 12 [accelerators] in Senegal; we need more,” one entrepreneur explained to me. Another, who is currently hosted in an incubator in Tunisia, credits that incubator with supporting his business’ rapid growth.
Mentors are a particularly important support that incubators – or other programs - can provide. One entrepreneur explained that “small businesses fail because people don’t ‘do their homework’ and don’t know what it takes to succeed; people lack business skills and mentors, and they can’t get to the next level.”
Highlight role models and champions. Several of the young entrepreneurs spoke passionately about the significance of role models in their environments. One talked about skepticism from family and friends. “[Family and friends say], ‘Why do you want to do this?’ I was inspired by a young entrepreneur in Nigeria.” Another stressed that the idea of entrepreneurship is alien to many young people, and without tangible examples of success, few will take this path.
Also needed are champions, established and credible brokers to help young entrepreneurs gain footing. One entrepreneur maintains his position at an international bank for precisely that reason. “I keep my day job to have the link between the street and inside. [Young entrepreneurs] need inside people who can vouch for them.”
Facilitate building networks and creating connections. They could not overemphasize the value of getting access to networks and leveraging connections. Opportunities for financing and markets often exist but are not accessible to new – and especially young – entrepreneurs.
Those challenges suggest a need to build business-to-business networks at a national and local level; provide specific entry points and navigation support; and help the networks gain credibility with government. As one entrepreneur explained: “The government doesn’t see us as partners, they see us as disrupters. They think we have other motives.” Connections with credible networks can dispel this perception.
Special attention to reaching low-skilled youth. A history of policy to support entrepreneurship and small and medium enterprise has taught us that simply focusing on business growth will not necessarily create jobs for the neediest populations - those with lower skills.
One entrepreneur highlighted this point, explaining: “When we create jobs, we need to target people with limited skills.” But, he added, this takes extra effort and “creativity.” He described an entrepreneur he had supported, a shoemaker who had hired 12 people for low-skilled jobs.
The implications for donors and programmers is that creating jobs and reaching marginalized populations requires special attention to both of these factors. Simply creating sustainable jobs will not necessarily reach the neediest, and simply focusing on training for the most marginalized will not create the volume of sustainable jobs needed.
The entrepreneurs I spoke to offered a specific call to action. Donors, they said, should use the leverage that they have with governments to help create change – in policy and regulatory environments, and in the bureaucracies and cultures that hinder young entrepreneurs from growing their enterprises.
For their part, donors need data – to show the long-term job creation impacts of their investments – and entrepreneurs and programmers must commit to collecting and sharing this evidence.
The heart of entrepreneurship in developing economies rests squarely on the entrepreneurs themselves – those who bring vision, determination, passion, courage, resilience, the willingness to take risks, to adapt and innovate, to risk failure, and the ability to pick themselves up each time. As one explained: “[New entrepreneurs need] courage and patience to accept their mistakes, rise up after falling and be ready to make new mistakes and face new challenges. I believe that there is not any one unique path to success, so we should be ready to try new roads and take some risks.”
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