1/7/2009 12:26:00 AM
For anyone reading the morning newspaper or web feed, the recent wave of massive job cut announcements have been startling. Just this morning, Alcoa announced 15,000 job cuts. That's a number I won't soon forget.
Job creation/destruction and entrepreneurship is a key area in which the Foundation has made investments over the last five years. We are not the first to look at this area, David Birch being perhaps the most famous, but it is a topic which remains not well understood nearly thirty years after his early work. Several recent papers from some of our grantees have confirmed using different data sets the relationship between net job creation and entrepreneurship. In "Turmoil and Growth: Young Businesses, Economic Churning, and Productivity Gains," Davis, Haltiwanger, and Jarmin show new establishments play an important role in job creation and that businesses that enter and survive the initial years as a business show strong employment growth. In "Do Small Businesses Create More Jobs? Evidence from the National Establishment Time Series," Neumark, Wall, and Zhang find that small businesses create more jobs in some industries but that it is a nuanced story which they continue to examine in forthcoming working papers which are as yet unreleased.
So if new firms or young firms are big contributors to job creation in the United States, why don't we read more about that? Most of the jobs created by entrepreneurship are added one or two at a time, in an often unheralded manner. The realities of this process make it inherently opaque to coverage. With more microdata available on this topic and better aggregated tables for researchers to mine, maybe this process can become more transparent to everyone? Certainly the U.S. Census Bureau's new series on job creation and destruction by state should prove useful, as should sites like YourEconomy.org.