If you doubt its importance, consider this: All net job creation from 1980 to 2005 came from firms that were five years old or less, according to a study by economists John Haltiwanger of the University of Maryland and Ron Jarmin and Javier Miranda of the Census Bureau. In any one year, that may not be true; but over time, mature firms lose more jobs than they create. “It’s not small firms but young firms that count,” says economist Robert Litan of the Kauffman Foundation, which sponsored the study.
If Americans don’t continue to create new firms — not just high-tech startups such as Facebook but construction companies, florists, restaurants, dry cleaners, engineering firms — the economy may languish. Beginning a business is a risky, exhausting, chaotic process. Every year, there are roughly 500,000 to 600,000 new company “births” and almost as many “deaths.” Half of new firms don’t make it to year five, says Litan…
There’s a warning here for the Obama administration: Complex regulations or high taxes may discourage startups and job creation. As for broader questions, the answers may remain murky for years. Has the mix of economic trauma and aging made us prudent — or merely fearful? Has economic resilience survived — or given way to a stand-pat society?
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