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Where Will the Jobs Come From?

Mark Marich

PDE staff were on hand for a Kauffman Foundation briefing at the Rayburn House Office Building on Capitol Hill on June 22. Our report of the event follows:

While the job creation discussion usually defaults to a debate between big and small companies, often ignored are the new startups and young firms that create a substantial portion of new jobs. Earlier this week, two researchers from the Kauffman Foundation presented data and trends to Congressional staff that showed that it is new and young firms – that mostly start small and grow rapidly — that create a vast majority of new jobs in America. 

Kauffman senior analyst Dane Stangler made the distinction between young and small businesses. Though more than 60% of all business firms in the U.S. are categorized as “small,” these businesses have a relatively minor (about 5%) share of the new job market. While in fact, firms in their first 5 years account for a disproportionate share of net job creation, about 65%.

Other data suggests a reason to be optimistic. The number of startup businesses has been surprisingly steady over the last few years, even as the economic climate has changed. In general, the age of entrepreneurs is rising, as more people in their 50s and 60s are delaying retirement to start their own businesses. However, there is more that can be done to encourage the creation of new business and new jobs to help combat an unemployment rate that continues to hover near 10%.

Tim Kane, a senior fellow at the Kauffman Foundation and an experienced entrepreneur, urged staff to consider the data when evaluating policies to promote economic growth, not just at the federal level, but at the state and local levels as well. While no specific policies were addressed, the message was simple and clear, “make it easier for entrepreneurs to start new firms.” Kane quipped “Let’s deregulate firm formation” in suggesting reduced paperwork and fewer unnecessary fees along with better coordination among government offices. Keeping in mind the sheer number of jobs that are added to the economy each year by start up businesses, U.S. policy should aim to remove any obstructions to new business creation.  

Kane also pointed out that although almost half of all technology firms in the Silicon Valley are owned by at least one immigrant, many foreign students at America’s technical schools have trouble getting visas to work in the United States after graduation. If we would like to attract talented employers who can add new jobs to our economy, we have to rethink U.S. immigration policy towards these potential entrepreneurs.

Kane and Stangler have a blog -- Growthology.org -- that further explores entrepreneurship and job creation. 

[Reported by Catherine Munson]

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