It’s a truism that small business is the primary engine for job creation, but a study by Tim Kane for the Ewing Kauffman Foundation finds that it’s even more precise than that – it’s startup small businesses that do the most in generating new jobs, and by quite a margin.
Based on his analysis of the U.S. Census Bureau’s Business Dynamics Statistics (BDS) database, Kane found that startups account for virtually all newly created jobs:
“By now it is well understood that firms large and small are continuously and simultaneously destroying and creating jobs. Even a mild level of this creative/destructive churn points to a dynamic economy much different than static economic models can describe,” Kane writes.
“However, beyond the job churn at existing firms, there is a dynamic in firm birth that seems to be very important for understanding job creation—specifically, the unique effect of new firms, or startups. Put simply, this paper shows that without startups, there would be no net job growth in the U.S. economy. This fact is true on average, but also is true for all but seven years for which the United States has data going back to 1977.”
Be forewarned, it’s a bit technical (it helps to have some background in statistical jargon) but it is a fascinating study, which you can read in its entirety here, courtesy of Real Clear Markets.
