It's new firms, not just small ones, that create the most jobs Small-business advocates, and some politicians, frequently assert that small firms are the great job-creation engine of the U.S. economy. That's a half-truth at best, the authors of a new National Bureau of Economic Research working paper say: Only the newest businesses, not all small firms, are disproportionate job creators. John... [more]
It's new firms, not just small ones, that create the most jobs
Small-business advocates, and some politicians, frequently assert that small firms are the great job-creation engine of the U.S. economy. That's a half-truth at best, the authors of a new National Bureau of Economic Research working paper say: Only the newest businesses, not all small firms, are disproportionate job creators.
John Haltiwanger, of the University of Maryland, teamed with the Census Bureau's Javier Miranda and Ron Jarmin to take a new look at the job-growth data. They find that a firm's age, not its size, is what makes it a job-growth engine:
We find that firm births contribute substantially to both gross and net job creation. Importantly, because new firms tend to be small, the finding of a systematic inverse relationship between firm size and net growth rates in prior analyses is entirely attributable to most new firms being classified in small size classes.
The news on startups isn't all rosy; the authors describe an "up or out" dynamic in which many small firms fail, destroying jobs in the process. Even so, the net effect is that young firms create many more jobs than old ones. When they look at size alone, and correct for a firm's age, small firms don't do any better than big ones.
http://www.stltoday.com/business/columns/david-nicklaus/article_4d76f4be-bace-11df-bc92-00127992bc8b.html[less]
