From the Abstract:
Compared to all prior recessions since the end of World War II, the 2007-2009
recession ranks worst in terms of the number of jobs lost (over eight million), and
second worst in the percentage decline (6 percent). The key to economic recovery will
come in the form of newly created jobs. But where will these jobs come from?
Using United States Census Bureau data from 2006-2007, this paper examines net new
job creation in terms of firm age rather than firm size. Until 2005, we knew that from
1980-2005, nearly all net job creation in the United States occurred in firms less than
five years old. This data set also shows that without startups, net job creation for the
American economy would be negative in all but a handful of years. If one excludes
startups, an analysis of the 2007 Census data shows that young firms (defined as one
to five years old) still account for roughly two-thirds of job creation, averaging nearly four
new jobs per firm per year. Of the overall 12 million new jobs added in 2007, young
firms were responsible for the creation of nearly 8 million of those jobs.
Given this information, it is clear that new and young companies and the entrepreneurs
that create them are the engines of job creation and eventual economic recovery. The
distinction of firm age, not necessarily size, as the driver of job creation has many
implications, particularly for policymakers who are focusing on small business as the
answer to a dire employment situation.
This study is part of the Kauffman Foundation research series Firm Formation and Economic Growth.