That reason, an economist for the World Bank postulates in a new research paper, is wrapped up with the faltering health of America's middle class in the 2000s. Camilo Mondragón-Vélez, a senior research officer at the World Bank Group’s International Finance Corporation, analyzed two long-running data sets and calculated the 1 million missing entrepreneurs figure. He traces it largely to families earning between $41,000 and $151,000 in today's dollars (a very broad definition of middle class, it should be noted), who constitute 60 percent of all business-owning households, but who flatlined on their rates of new business ownership after decades of growth.
The wealthiest families, in contrast, kept increasing their rates until the recession:
The analysis, released by the liberal Center for American Progress think tank - and which is not an official position of the World Bank in any way -finds that it now takes would-be entrepreneurs more time, more income and more education to start a business, compared to previous decades. The average new business owner was 47 years old in 2010, up from 41 in 1970. About 67 percent of those new owners had at least some college education in the 2000s, up from about 60 percent in the '90s.
The median wealth of a family that was about to start a business was three times as high in 2009 than a comparable family that wasn't about to start a business. That's up from two times as high in the '90s.
Those trends, Mondragón-Vélez notes, happen to coincide with a period of middle-class income stagnation and widening gaps between the wealthiest Americans and everyone else. He overlays those trends and speculates that "limited wealth accumulation capacity has been gradually making entrepreneurship in America a luxury type of good."
There is plenty of evidence that declining entrepreneurship is hurting middle-class Americans. Mondragón-Vélez is arguing that the reverse is also true: that the weakening of the middle class is eroding new business growth. “Given the constraints to accumulate wealth for the middle class, what I was seeing was, all the consequences," he said in an interview. "If you don’t have enough wealth, you have to wait longer to be an entrepreneur.”
The paper also raises questions that Mondragón-Vélez does not really attempt to answer, but which could have broad implications for policymakers. Most notably, he finds that while new-business creation stalled in the 2000s, the failure rates of existing businesses increased. It's reasonable to ask why that is - whether increased government regulation, crimped access to credit, growing power for incumbent firms, or something else entirely, is pushing more businesses to extinction.
“Maybe now the environment has become more competitive," he said. "Maybe it’s getting riskier to start a small business.”
And maybe that risk, whatever its cause, is getting harder for middle-class Americans to bear.