Home > Entrepreneurship By Necessity – A Consequence of COVID-19 Pandemic

Entrepreneurship By Necessity – A Consequence of COVID-19 Pandemic

The COVID-19 pandemic triggered a new wave of startups in the United States. Lack of opportunity led to the number of new businesses rising by 24%.

The COVID-19 pandemic created a recession across the globe, with all economies being affected – developed, emerging, developing and frontier. People lost jobs, and, in the best-case scenario, their jobs were put under government aid until the situation normalised.

In the United States, though, the system is not so protective of employees. Many lost their jobs and entered unemployment, depending directly on state aid. In sharp contrast with Europe, where governments supported businesses on the condition of not laying off their employees, in the United States, the employees were laid off, and the businesses moved on.

To many, relocation is not an option. The world requires a more competitive workforce by the day, and, beyond a certain age, changing industries or moving to a different region in search of a job is not that simple anymore.

As a consequence of the pandemic and all it brought to the US society, the number of startups increased dramatically. Effectively, entrepreneurship flourished during the pandemic for one simple reason – the newly unemployed were forced to start their own businesses to generate income.

24% Rise in New Business Applications in the US in 2020

The proverbial American entrepreneurship was evident during the COVID-19 pandemic. The exponential rise in new businesses came from sectors like online retail, transportation, or personal services.

One may argue that other rival economies have experienced something similar. However, that is not the case. For example, the number of new business entities in Germany, Spain, or Portugal declined over a similar period.

The explanation comes from the different ways the governments reacted during the pandemic. In Germany, for example, the “Kurzarbeit” schemes allowed for partial working hours, but the employees received almost the full wages. The difference was covered by the government. Therefore, the workers were not officially unemployed, and most of them did not feel the need or pressure to do something else to generate income.

Now that the economies are reopening due to the success of the vaccination campaigns, the big question is which country handled the crisis better? On the one hand, the United States stimulated entrepreneurship by necessity. On the other hand, the rival economies choose to protect employees.

Will all new businesses survive in the years ahead? Unlikely. However, the ones that do have the potential of creating a competitive advantage for the United States economy, once again leading in the entrepreneurship race.

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