Sunday, September 12, 2010

To Generate Jobs, Nurture Start-Ups (Big or Small)

For decades, the assumption has been that small business is the economy’s dynamic engine of job generation. Look at the numbers broadly, and that is the irrefutable conclusion: two-thirds of net new jobs are created by companies with fewer than 500 employees, which is the government’s definition of a small business.

But research published last month by three economists, working with more recent and detailed data sets than before, has found that once the age of the businesses is taken into account, there is no difference in the job-producing performance of small companies and big ones.

“Size plays virtually no role,” says John C. Haltiwanger, a co-author of the study and an economist at the University of Maryland. “It’s all age — start-ups are where the job-creation action really occurs.”
My guess is that there is less here than meets the eye. Jobs are created when money is invested. It doesn't matter whether the money is invested in large companies or small companies, young companies or old companies. It's pretty basic: newly invested money almost (but not always) means new jobs. So to encourage job creation encourage the investment of new capital.

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