Entrepreneurship is the way out of a weak labor market
06/20/2022
The gradual return of the flow of people and the change in habits, with the expansion of remote work and the acceleration of digitalization, generated an increase in new firms in 2021, but with a greater bet on activities like healthcare, technology and technical services, which had already emerged before the Covid-19 pandemic and are now gaining ground more quickly. Entrepreneurship is also growing as an alternative to a labor market that is still recovering, according to specialists.
Although commerce in general remains the leader in the activity profile of new companies, the sector has lost space to segments linked to healthcare and social services, technical and information technology (IT) activities, or professionals who, supported by the flexibility of remote work, have decided to become entrepreneurs.
At the same time, the accommodation and food group, which includes hotels and restaurants, lost space, although it maintains a recovery curve in new businesses. This is the general trend verified by data about the opening of companies from boards of trade in the states of São Paulo, Bahia and Paraná. The three states accounted for about 40% of all new businesses registered last year in the country, according to data from the federal government’s Business Map.
In São Paulo, there was a record in the start of new companies in 2021. According to data from Jucesp, the state’s board of trade, the number of new businesses totaled 288,500 last year, up 28.7% compared to 2020 and 28.5% against 2019, the year before the pandemic. Terminations also increased, but with a much smaller number and in a more decelerated way.
In 2021 a total of 120,900 companies closed doors in São Paulo, up 16.2% from the previous year and 0.5% against 2019. The numbers for the state do not include data from Individual Micro-Entrepreneurs (MEIs).
A look at the data over a longer period shows a change in the sectors that today attract those who want to open their own business. In São Paulo, the general commerce group, including retail and wholesale and the sale of vehicles to end consumers, represented 33.8% of the new companies in the state in 2014, but has gradually lost share over the last few years, reaching 26.8% last year. The data indicate this shift was already underway before the pandemic. In 2019, the sector’s share was 28.5%. That is, the number of new businesses in the segment grew over the seven years, but at a slower pace than the total number of new enterprises.
The commerce space was taken up by health and social services activities, which jumped to 9.6% last year and to 6% in 2019 from 2.5% 2014. Information and communication, which brings together IT-related areas, advanced to 7.7% last year and 6.6% in 2019 from 4.6% in 2014. Professional, scientific and technical activities – which include diverse branches such as consulting, auditing, business management, firms in architectural, engineering, advertising and market research services – advanced to 12.1% in 2021 from 6.78% in 2014.
The state of São Paulo continues with a record number of new companies in 2022. From January to May there were 123,500 new businesses, or 8.4% more than in the same period in 2021.
In Bahia and Paraná, the dynamics of change in sectors were similar. With a total of 37,827 new companies in 2021, Juceb, Bahia’s board of trade, also recorded a historic peak last year and a change in the formation of new businesses over a longer period. From 2014 to last year, the share of general commerce among new companies opened in the state, including headquarters and branches, fell to 40.5% from 45%.
Even in a state recognized for its tourism vocation, the share of lodging and food ventures, a group in which restaurants and hotels are included, dropped to 4.1% in 2021 from 7.1% in 2014. In 2019, the year before the pandemic started, the share was 5.1%, showing that the segment, although growing, was already expanding at a slower pace than other activities. The data for Bahia do not include MEIs.
The data from Jucepar, Paraná’s board of trade registry, includes MEIs and also points to a record number of new companies in 2021, with a total of 268,440 companies, an increase of 14.8% compared to the previous year. Also among Paraná companies, commerce in general is the main sector among new businesses, but its share fell to 26.5% in 2021 from 32.3% in 2015. There was an increase in the participation of professional, scientific and technical activities, health and social services, and information and communication. Together, these segments advanced to 14.1% from 8.7% in the same period.
Carla do Nascimento, an economist at the coordination of economic situation of the Superintendence of Economic and Social Studies (SEI) of the Bahia government, says that the advances in some activities were accelerated by the pandemic, but are within a change that was already happening as a reflection of technological innovation and increased demand. This is the case of the health and information technology sectors, she points out.
New businesses in health and social assistance advanced to 9.5% from 4.8%. Retail and even sectors linked to tourism may have felt the economic downturn. Ms. Nascimento recalls the period covered includes 2015 and 2016, when the country’s GDP contracted, without a complete recovery from 2017 to 2019. In 2020 there was the recession within the pandemic, with recovery in 2021.
The economic contraction of the pandemic, explains the economist, led many entrepreneurs to close their doors in 2020 and part of 2021. With the recovery of the economy last year, however, there was a bet on new businesses. At the same time, with the advance of digitalization and remote work, people who lost their jobs or even people who had jobs decided to bet on their own enterprises, which also, she says, can help explain the performance of the group of professional, scientific and technical activities, which advanced to 7.6% from 4.9% in 2014.
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Ademar Bueno — Foto: Silvia Zamboni/Valor
Ademar Bueno, head of Jucesp, points out that the pandemic has changed the work system of many professionals. In some activities that were almost exclusively done in person, he says, they started to work only remotely during the most severe period of the health crisis and, with the most recent opening of the economy, the hybrid system was adopted. This led to a professional and activity reorganization that also required the start of new companies, he says.
Mr. Bueno also points out that about 40% of new companies set up in São Paulo have among their partners some tax ID number that is already in another company. It is someone who closed a business that broke down, he says, and who, after regularizing the situation, decided to start up a business again. He points out that programs offered by the state government have helped in this regard.
Despite the fact that the accommodation and food group has lost share in the start of new companies – to 4.8% last year and 6.3% in 2019 from 7.7% in 2014 –, Mr. Bueno points out that bars and restaurants still remain a big bet for new businesses. In the state of São Paulo, according to him, 40 companies are opened in this area per day, on average. Closures are also high, about 30 a day.
*By Marta Watanabe — São Paulo
Source: Valor International