Rising Self-Employment Among Younger Generations in Germany - According to KfW Study
Younger entrepreneurs on the rise in Germany - Start-up founders in Germany are increasingly youthful, Trend emerging.
In the heart of an economic slump, Germany witnesses a surge in self-employment, with the number of new businesses skyrocketing by a whopping 17,000 or 3%, reaching 585,000 in 2024, states a KfW research. The study attributes this rise to the chilling job market that's pushing people to start their ventures.
Younger folks are leading the charge to entrepreneurship
The KfW study reveals a significant drop in the average age of entrepreneurs to an all-time low of 34.4 years. At the turn of the millennium, this average hovered around 37 to 38 years old, according to KfW.
In 2024, a record 39% of all entrepreneurs were aged between 18 and 29. Despite their youth, young folks are warming up to self-employment, while the number of older entrepreneurs dwindles. KfW notes in its Start-up Monitor that it conducted 50,000 phone and 10,000 online interviews for this report.
The confidence of the young doesn't go unnoticed by KfW, who sees this development as a bright spot. 36% of 18- to 29-year-olds expressed their preference for self-employment over being employed. Start-ups are also on the rise for the following year, predicts KfW's chief economist, Dirk Schumacher.
Start-ups creating opportunities for masses
The importance of start-ups for the economy is highlighted by KfW, as they support the middle class, introduce fierce competition, and bring in innovations and job opportunities. In 2024, around 485,000 full-time jobs were generated through new start-ups. KfW defines start-ups as individuals who embark on self-employment in full- or part-time, freelance or commercial capacities through new ventures, participation or takeover.
Digging deeper, the escalating numbers shouldn't overshadow the fact that the entrepreneurial spirit in Germany remains relatively low, warns Schumacher, due to the fear of bureaucratic hurdles and financial risk. With 30% of start-ups failing within three years, it's evident that entrepreneurship involves significant risk. Overall, the number of start-ups has stagnated since the turn of the millennium, with around 1.5 million start-ups at its peak.
"The stable economy over the past years may have steered people towards the comfort of employment," says Schumacher. He adds, "It's a question of mindset." In addition, the aging society, demographic change, and lack of financial confidence can discourage entrepreneurship. The new government's initiative to promote entrepreneurial skills in schools is a positive step towards encouraging more young people to pursue self-employment.
In an effort to address the growing trend of entrepreneurship among younger generations, there's a call for increased vocational training in areas such as small-business management and finance, to equip the youth with the necessary skills for their ventures. The KfW study suggests that a higher level of vocational training could potentially increase the survival rate of start-ups beyond the initial three years, lowering the current failure rate of 30%.
On the other hand, EC countries could implement policies that offer financial incentives and reduce bureaucratic hurdles to attract more entrepreneurs and start-ups, thereby boosting career opportunities and job growth. The creation of successful small businesses could also lead to the development of new industries and technologies, making a significant contribution to the overall economy.
Moreover, there's a need for fostering an entrepreneurial mindset among young people, which could be accomplished through comprehensive education programs that emphasize the importance of risk-taking and innovation in today's fast-paced business world. Encouraging entrepreneurship at a young age could not only stimulate economic growth but also empower the next generation to pursue their passions and carve their own paths in careers.
