When you hear about job growth in the US economy, you might attribute that to large corporations removing their hiring freezes or small businesses growing their employee base. You might be surprised to know though, that there is another factor that has a significant role in the job growth of the US economy: startups.
According to the paper, The Return of Business Creation published by the Kauffman Foundation Research Series, US companies with one to four employees who are less than one year old, have accounted for over 1 million jobs per year, whereas companies less than one year old with five to nine employees have accounted for half a million jobs per year. These statistics are an average of not only recent years but rather an average of over the past three decades!
Analyzing job creation by the age of the firm rather than by the size of the firm was done for the first time in July 2010, as Tim Kane published a study for the Kauffman Foundation indicating that newly formed firms in the US were responsible for almost all of the net job creation. A separate study published by the Bureau of Labor Statistics in August 2010 supported Kane’s claim. What was unique about these studies was using the angle of analyzing net job growth from the perspective of firm age rather than size. Attributing job growth in the US economy to a firm’s size is a common misconception according to the study Who Creates Jobs? Small vs. Large vs. Young. This study also highlights the importance of startups, as one of its conclusions is that 20% of US gross job creation along with almost all of net job creation can be attributed to startups.
What are the implications of these research findings for you? If you are thinking about starting your own business, you now know that you have the potential of improving the health of the US economy. Even if you are not planning on an entrepreneurial career, you may be able to share these studies with someone you know who is in order to highlight the positive impact of their work. Having this macro level view of how startups improve the economy is important but analyzing the micro level reveals something important as well: that startups provide income for millions of Americans.
I personally am employed by a startup, Traklight, and I am very grateful to Traklight’s founder Mary Juetten for her willingness to launch her own business as I am sure the other employees of Traklight are as well. We at Traklight understand the value of startups as they have affected our lives personally. We hope that you will understand the importance of startups as well not only for the US economy overall, but for the lives of the individuals who are grateful to have employment from them.
If you’re interested in starting your own business or if you know someone who is, Traklight would love to help! Check out our Ultimate Startup Business Toolkit on our website for the support you need to start your own business!