The American economy is changing, and millennials’ attitudes about work and their careers are changing with it. The rapid rise of the so-called “sharing economy” embodies many young Americans’ new economic ideal—one driven by technology, convenience, and flexibility. However, government policy, particularly in regards to regulation, is stuck in the 20th century and continues to hold back economic opportunity.
In testimony before the Joint Economic Committee I described how federal policymakers can embrace millennials’ version of the American Dream. Another witness, Rep. Elise Stefanik (R-NY), the youngest member of Congress, used the term “flexibility” five times during her five-minute prepared testimony. This emphasis was intentional. Stefanik has met with countless young entrepreneurs and workers to hear their career plans.
Millennials have been called the most entrepreneurial generation. While this may be true based on their desires to start businesses and their near-universal respect for entrepreneurs, few young Americans have followed through on their dreams.
A Bentley University survey of millennials found that two-thirds of respondents have a desire to start their own business and Deloitte found that about 7 in 10 millennials envision working independently at some point in their careers.
Yet fewer than 4 percent of private businesses are at least partially owned by someone under the age of 30. This is the lowest proportion since the Federal Reserve began collecting data nearly a quarter century ago.
Additionally, on December 8, the Bureau of Labor Statistics projected that the U.S. labor force will continue to age. The median age of the labor force is estimated to reach 42.4 in 2024, up from 41.9 last year and 37.7 in 1994. While this statistic on its own is not troubling, BLS also expects the labor force participation rate for young workers to fall below 50 percent in 2024, even though 16 to 24 year-olds already face a historically-low participation rate of 55 percent.
Rather than embrace the changing economy to promote entrepreneurship, many politicians call for a return to the manufacturing “golden age” of the 1950s—and the high unionization rates and inflexible workforce that accompanied it.
Steps to limit workers freedom can be seen at the Department of Labor, which is trying to cut the use of independent contractors by designating more workers as employees. If successful, this move would make those workers who are currently classified as independent contractors easier to unionize.
Making it more difficult and costly to hire independent contractors will have profound effects on entrepreneurship and economic growth. Independent contractors have propelled the sharing economy’s growth. Uber drivers, TaskRabbit taskers, and Airbnb hosts all have the freedom and flexibility that comes with being self employed. The American economy is generating more jobs in which workers are self-employed and contract out with other companies to apply their skills.
This development creates many new opportunities for workers and companies. Advances in technology have greatly reduced transaction costs and increasingly those with goods or services to provide can become their own bosses. People are taking advantage of this additional way to make extra money, even if they have separate full-time jobs. On the employer side, rather than being tied to full-time employees, businesses are able to use contractors efficiently to carry out tasks that arise from expanding. Bringing on a graphic designer, an IT professional, or even a plumber seamlessly brings short-term, specialized skills to a firm.
This new model does not fit into what many policymakers consider the 9-to-5 employment ideal, and this is why regulators are making it more difficult for flexible work opportunities to grow.
The American Dream may have once been finding employment at a large company, working there for a few decades, and then retiring with a defined-benefit pension, but now millennials’ American Dream looks much different than their parents’ and grandparents’. Millennials seek new opportunities to change or advance their careers, and individualized, flexible work arrangements.