For generations, the U.S. economy has grown at an annual rate of about 2 percent, but that hasn't happened in wake of the Great Recession. In fact, the economy is still well below that trend, and the gap is getting wider. Many economists think U.S. economic growth, now at less than 1 percent a year, may remain weak for years. UCLA economics professor Lee Ohanian says a decline in entrepreneurship is at the heart of the current weakness. Ohanian underlined some of these less-than stellar stats for attendees of the Channel Company's Best of Breed Conference Tuesday in Orlando, Fla. Ohanian wasn't all doom and gloom, though. He's got a few ideas for how the economy could be improved and for the role tech companies can play in that recovery. He spoke with ITbestofbreed.com following his presentation.
What are the headwinds to productivity growth?
We are not producing enough skilled workers. Our education system is not training our kids to be globally competitive, as well as to have the skills to have today's highest-paying job. Entreprenurs may have the ideas, but you need the skills to take those ideas to the marketplace and make them succeed. Immigration reform. A lot of productivity growth comes from small business, and we've raised the cost of doing business. A rapidly growing 50 person firm can't afford to hire a dozen tax accountants to help figure out this stuff. The very mature, huge businesses exploit it, but the relatively small, young guys are penalized by it.
Which of today's small biz will be tomorrow's leaders?
The areas expanding certainly are information and communication technology. They will be a leader, as well as health care. There's a real opportunity in financial services. The older companies are very mature, and obviously struggled recently.
Why has entrepreneurship declined?
Most economists trace the decline in entrepreneurship to a business climate that is less friendly. It's more costly to do business, there's more risk involved. If it's more expensive to become an entrepreneur, then fewer people will become entrepreneurs. Unfortunately that's what's happened.
What policy solutions could help encourage entrepreneurship?
We should reform immigration restrictions for high skilled workers. High tech companies often note that it's difficult to find high skilled workers. We make it very difficult for high skilled workers to stay in this country. The H1B Visa program is fully subscribed within four days.
NEXT: The Skills Gap