Could merging the Labor and Education departments, as the Trump administration proposes, help make the U.S. education system more responsive to the 21st century needs of the labor market?
Students hope so. While the economy is booming, and the class of 2018 has it better off than its millennial predecessors, the entrepreneurship rate is still sputtering. Combining Labor and Education could help influence colleges to add broad entrepreneurship requirements, which are needed for all students in today’s economy where creative destruction is seemingly upending every profession.
{mosads}According to Census Bureau data, the start-up rate is still hovering near its Great Recession low. The share of young companies less than a year old has declined by almost half in the last generation. And the Kauffman Foundation’s Startup Activity Index is still below its pre-recession level. Given that start-ups drive productivity and innovation, their disappearance has broader implications than just reduced entrepreneurial opportunity.
There are many reasons for the low start-up rate. For one, health-care premiums on the individual market doubled between 2013 and 2017, according to the Department of Health and Human Services. These high costs tip the scales for would-be entrepreneurs in favor of keeping their day jobs with relatively inexpensive health insurance.
But perhaps the biggest reason for the low start-up rate is the country’s higher-education system, which has not modernized along with the economy. Roughly one-quarter of the 1.9 million bachelor degrees awarded in 2016 were in the fields of humanities, psychology, communications or languages — majors where students generally graduate without any entrepreneurial instruction at all.
Just as students majoring in business and STEM (science, tech, engineering and math), are required to take liberal arts courses because these ideally teach critical thinking skills, students majoring in liberal arts should be required to take entrepreneurship courses. Entrepreneurship can bring solutions to scale, and can especially help liberal arts graduates who have few, if any, hard skills.
Liberal arts programs would also better prepare students for the 21st century economy by incorporating principles of entrepreneurship into the general curriculum. In practice this could mean history classes that highlight how comparative advantage and trade made the West rich; geography classes that explain how micro-lending contributes to indigenous wealth creation in Africa; sociology classes that showcase how economic opportunity is the best way to alleviate poverty; philosophy classes that teach the morality of capitalism.
It’s not only college curricula that have weighed on startup rates but also college cost. According to the Department of Education, the cost of attending a four-year college has risen by 64 percent over the past 20 years, adjusted for inflation. As a result, Americans now shoulder $1.5 trillion in student loan debt — an average of more than $30,000 per borrower. Carrying this much debt makes it difficult to take the entrepreneurial plunge, given that it usually means going into more debt. Colleges that more efficiently teach entrepreneurial skills valued by the job market play an important role in helping to bring down these costs.
All this isn’t to say there’s no entrepreneurial movement on campuses. A Kauffman Foundation report finds entrepreneurial programs have more than quadrupled since 1975. The re-examination of the Department of Education priorities as a result of a merger with the Department of Labor could help build on this momentum to make entrepreneurship a core part of the college experience.
All students should be equipped with the thinking to start the next Etsy, Main Street diner or The Home Depot. Only when entrepreneurship is a core pillar of the educational system will students be able to take full advantage of the modern economy, reverse the dwindling startup rate, and — more importantly — renew the American dream.
Bernie Marcus is a co-founder of The Home Depot and founder of the Job Creators Network, a nonprofit business advocacy organization. Justin Dent is co-founder and executive director of Generation Financial Knowledge Development (GenFKD), a national financial literacy and entrepreneurship initiative working to expand economic opportunity for young Americans. Follow him on Twitter @ImWithJD.