Generation Z is contributing massively to entrepreneurship, as young adults bypass traditional college and use artificial intelligence tools to start businesses and navigate a tight labor market.
A recent study of internal finance data from the Bank of America Institute found that the tally of Gen Z adults requesting a business startup loan in June grew 66% from a year earlier, far outpacing all other generations.
Generation X adults still led new applications in June, reflecting a longstanding trend. But Bank of America estimated that one Gen Z adult started a business for every four Gen Xers who did the same, up sharply from a 1-to-26 ratio in June 2020.
The study said declines in applicants planning to pay wages show AI has reduced startup costs, making it easier for young people to build information technology businesses.
“If AI or other digital tools can help founders automate administrative tasks, bookkeeping or content creation, the upfront need for employees could be lower than in past startup cycles,” the study noted.
Bank of America handles $2.7 trillion in assets through 3,600 branches and 15,000 ATMs. It is the nation’s second-largest bank, after JPMorgan Chase.
The Census Bureau estimated this month that Americans filed 578,926 business applications in July, up 8.1% from June. Only 35,024 of them, or roughly 6%, said they planned to pay wages.
“It’s young people starting businesses because traditional employment has stopped being the safer bet,” said Shampaigne Graves, the Dallas-based founder of Boldifi, a digital business academy for women entrepreneurs.
Andy Gibbs, California-based founder of the AI-driven home remodeling company RemodX, said today’s twentysomethings are doing what their older siblings did with Google, YouTube and Instagram.
But he said AI’s ability to create businesses without employees lets entrepreneurs “generate code, research markets, create advertising, produce graphics, draft contracts and automate customer support at a fraction” of the costs five years ago.
“Every generation exploits the lowest-cost enabling platform available to it,” said Mr. Gibbs, who has decades of experience in starting businesses. “AI is today’s platform, and Gen Z is naturally first in line because the tools are native to how they already work.”
The Trump administration applauded the trend Monday in a statement to The Washington Times.
“American entrepreneurs of all ages are taking advantage of the Trump administration’s pro-growth, pro-business agenda of tax cuts, deregulation and energy abundance,” said White House spokesman Kush Desai. “President Trump is committed to unleashing innovation and cementing America’s technological dominance, and the downstream opportunities are ripe for the picking.”
Changing workforce
Technology and other white-collar jobs that long attracted college graduates have contracted sharply over the past three years, driven by AI automating clerical tasks.
The unemployment rate for people aged 20 to 24 was 7.1% last month, compared with an overall rate of 4.1%.
“Recent grads face intense job competition and a gap between what they learned in college and what employers actually need,” said Sam DeMase, a ZipRecruiter career expert.
A ZipRecruiter survey of recent college graduates found that 37.5% were considering starting a business. Another 72.7% were eyeing alternative employment options.
Workforce analysts have dubbed it a “low-hire, low-fire” environment: Employees are embracing their current jobs, and entry-level listings increasingly seek experience over credentials.
“If you can’t get the junior job, an LLC costs a hundred bucks and a weekend,” said Lacey Kaelani, CEO of Metaintro, a New York City-based job search engine. “This could be a bigger trend of more and more people feeling empowered with the AI tools in the market and the creator economy to be able to work for themselves.”
AI has also removed educational barriers to young people starting a business.
Several analysts noted that the Bank of America study found lower- and middle-income households drove most of June’s business creation, suggesting more young people have embraced entrepreneurship over a four-year degree.
“Entrepreneurship is expanding beyond the traditionally wealthy and well-connected, giving more Americans an opportunity to turn ideas and hard work into ownership and independence,” said financial analyst Mark Minella, co-founder of the National Christian Association of Financial Consultants.
Superhuman, a company formerly known as Grammarly that offers AI-driven workplace tools, found that 69% of 2,000 college students it surveyed June 29-July 7 said AI would make jobs harder to find. Just 45% expressed optimism about the job market after graduation, and 22% said they changed their studies to adjust.
Andrew Crapuchettes, CEO of the Idaho-based jobs board RedBalloon, said he’s tracked “a surge of young Gen Z professionals” starting businesses or moving directly into the workforce after high school.
“Getting credentialed with the right degree in the right field, like being a physicist or doctor, is still incredibly useful,” Mr. Crapuchettes said in an email. “But many young Americans have signed up for tens of thousands of dollars of debt for a degree that they most likely won’t use when they join the workforce.”
Future trends
The experts disagree on how long the AI startup boom will last — and to what extent it will disrupt the education system.
Sean Higgins, an analyst at the libertarian Competitive Enterprise Institute, said it partly depends on how long businesses maintain skeleton crews and employ AI to eliminate positions.
“Many in Generation Z have decided they cannot wait for an offer and are instead trying to create their own opportunities,” Mr. Higgins said. “In effect, the entrepreneurs are doing the same thing the established businesses are doing: using AI to get along with smaller staffs.”
Nora Demleitner, the immediate past president of St. John’s College in Annapolis, Maryland, said entrepreneurship makes sense for young people who spent the pandemic watching “Shark Tank” and other finance reality TV shows.
However, she said the Bank of America study gives “no indication that this is a generation of college dropouts or college avoiders.”
“Many of these people will also be college students and graduates who are putting their computer skills to work as big tech is offloading staff,” Ms. Demleitner said.
Others said the key factor will be how long entrepreneurs in their 20s can make a living from AI-powered websites and services. They pointed to growing customer dissatisfaction with automated chatbots as a warning sign.
Morissa Schwartz, the New Jersey-based founder of the independent book company GenZ Publishing, said the jump in young people starting businesses is “both an innovation choice and a labor-market workaround.”
“The most common lanes are creator and media businesses, marketing and content services, e-commerce, education or coaching, and digital products,” Ms. Schwartz said.
“The trend is positive when AI expands access and lets founders test ideas cheaply,” she added. “But AI still cannot manufacture customer demand, judgment, or trust.”
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