Jobs. Jobs. Jobs. In this stumbling economy and time of high unemployment, there is a lot of noise out there about how to stimulate the economy and create jobs. Political parties have turned it into a ‘raise taxes’ vs. ‘cut spending’ debate. However, it is clear that to get the economy back on track we have to create more jobs – and startups create jobs.
A report by the Kauffman Foundation in 2010 says it best:
“Startups aren’t everything when it comes to job growth. They’re the only thing.”
We often hear small business is the job growth engine in the US. But it’s not small businesses – it’s NEW startups. The report uses government data and shows that since 1977, in all but 7 years, existing businesses large and small have had net job losses. Virtually all of the job growth has come from startups – to the tune of an amazingly steady average of 3 million jobs a year.
Sure, but don’t many of those new businesses go under in subsequent years? Yes. Half will go under in 5 years. 70% will go under in 10 years. However, the same data shows companies 5 years old have about 2.24 million employees. Simply put, netting job loss from the firms that go under and job creation from those that grow, about 75% of those 3 million new startup jobs will exist in 5 years.
Any strategy for job growth needs to start with a focus on new business creation. The sooner our national and local politicians start focusing on what we can do to support startups, the sooner we will see the unemployment numbers go down.