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Are startups the answer for graduates in this economy?

PHILADELPHIA — In a crowded room recently on the top floor of Temple University's new business school building, senior Kyle Pauly waited in suspense.

Would he win the $65,000 Temple University Innovation and Entrepreneurship Institute's top prize in the annual "Be Your Own Boss Bowl" for his team's plan to market a line of craft beers?

"We have no exit plan, as we intend to stay in this business the rest of our lives," Pauly, 23, a finalist, explained to a 14-judge panel of businesspeople and entrepreneurs who quizzed him about cost per keg, manufacturing capability, the break-even point and finally, an exit plan.

Entries to the bowl were up 20 percent, and the number has tripled in two years. Temple likes to view this as evidence of its success as a leader in entrepreneurial studies, but the reality might be a little different.

Even though college hiring seems to be picking up, unemployment among people ages 20 to 24 stands at 15.8 percent, the U.S. Labor Department reported earlier this month. With nearly 2.4 million young adults out of work, it is no wonder that students such as Pauly figure they may as well make their own way.

Pauly had taken some time off, so he will graduate in December, more than a year behind his peers, graduates of the Class of 2009. He said they had not fared well in the worst recession since the Depression of the 1930s.

"None of them has a full-time job in anything pertaining to their degree," he said. "It's depressing. They didn't go to college to make $400 a week being cooks. I have a friend in security, making $12 an hour working the graveyard shift. He's basically a zombie."

Ed Koc, director of research for the National Association of Colleges and Employers, said that his organization's surveys show an uptick in employment this spring.

More companies are hiring, more companies are recruiting, and more students are getting jobs. Still, it's no picnic for 2010 graduates. The only thing that makes 2010 look even slightly decent is that 2009 was truly wretched.

"Last year was a disaster," Koc said. "College hiring was down 22 percent from the year before. Spring has turned things around." Hiring projections are up 5.3 percent over 2009.

Signs are hopeful, but caution still necessary

Seeing unemployment among their classmates and their parents has led young people to change their job priorities. In 2007, the peak of the job market, graduates valued opportunity for advancement, Koc said.

"Now they are very concerned about security," he added.

College career center directors say they are seeing hopeful signs, measured by more recruiters on campus, more job postings on their campus websites, and more news about jobs for seniors.

"We are seeing the return of banking organizations recruiting for their management-training programs," said James Marino, director of the career center at Rutgers University in Camden, N.J.

"More organizations are seeking interns," he said. "That could be the forerunner to full-time hires."

Matt Brink, director of the career-development center at St. Joseph's University, said he had seen the same signs. "I'm cautiously optimistic," he said.

Temple's career office, which surveys its students about their job plans, found self-employment was the second-highest employment outcome for 2009 graduates.

"We weren't expecting to find that," said Rachel A. Brown, director of Temple's career center.

"There is a case for people starting a business as a default" if they cannot find work, she said. "More often, it's a choice they have come to embrace."

That is what happened to Shannon McDonald, a 2009 Temple graduate who founded an online newspaper covering northeast Philadelphia,

"It started with the tanking economy," she said, which led her to understand that she would have to build her own life. "It would be fantastic if one day I could make this my full-time job."

McDonald just signed a deal with the Metro. Her paper is just beginning to make money, but nowhere near enough to let her quit her day job as a nanny.

Lonnie Golden, a labor professor at Pennsylvania State University, cautions against reading too much into these startups. "It's a little dangerous to interpret this as a return of the entrepreneurial spirit," said Golden.

Even self-employed not immune to downturn

The definition of "self-employed" is murky and could include temporary work, freelancing and contracting. Selling items on eBay could be self-employment, he said.

Even the self-employed can become unemployed. Their unemployment rate is at 6.2 percent, up from 5.9 percent a year ago.

The winners at the "Be Your Own Boss Bowl" were four Temple seniors, all engineers, who say they need to be employed to finance their dream of self-employment.

Their company, Next Engineering, created a motorcycle suspension system.

CEO Chaitanya "Chatty" Sakhalkar said the job market was tough, even for engineers who command the highest starting salaries among college graduates.

Nonetheless, Sakhalkar said, he and his partners are committed to their company. "But if the jobs were easily available," he added, "we might not have put as much effort into the bowl."

Waiting for the contest results, Pauly laughed when he said that he always wanted to be the cool boss. But more seriously, in this economy, "I don't know if I can trust an employer to give me a job where I can make financial plans for a year, instead of week-to-week.

"If I'm going to be in that situation," he said, "I may as well be a startup."

Are startups the answer for graduates in this economy? 05/08/10 [Last modified: Friday, May 7, 2010 5:47pm]
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