By Samuel Rines
Where are all the jobs? Even in the midst of a multi-year recovery, labor-market indicators make for grim reading. The hires rate sits well below pre-recession levels, the unemployment level has declined less than the number of people leaving the labor force, and the quit rate is barely off its 2009 bottom.
Conventional wisdom holds that small businesses are the engine of employment growth, the solution to a lack of labor-market dynamism.
And small businesses are critical to a healthy US economy—97 percent of all firms have less than one hundred employees. But it is start-ups, which just happen to be among the smallest firms, that drive employment growth. Between 1994 and 2000, these newly born businesses contributed an average of 190 percent of newly created jobs. Put another way, start-ups created jobs and older firms destroyed them. Even in the middle of the Great Recession, start-ups were creating jobs. Granted, the job creation slowed, but it never dried up.
The question economists should be asking is whether entrepreneurs are creating a sufficient number of new companies. And, more to the point, whether these companies are creating the needed employment opportunities.
Source: nationalinterest.org
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