October 28, 2014

By Dr. Roy Carriker

A very interesting 2009 study by the Kauffman Foundation using United States Census Bureau data looked at job creation as a function of company age. Their findings were very illuminating:

• Since 1980 nearly all net job creation in the U.S. occurred in firms less than five years old.
 
• Without startups, net job creation for the American economy would have been negative in all but a handful of years.
 
• 2007 census data showed firms aged between one to five years accounted for roughly two-thirds of job creation.
 
• The net job creation year-to-year principally comes from three sources: startups; firms of between one and five years of age; and the oldest (and largest) companies, creating a “barbell" in jobs created vs. company age.
 
• The Kauffman researchers suggested this barbell effect might be explained by the well-recognized dynamic of larger companies (thus older, taking time to attain size) fueling their own growth by absorbing startups and younger companies for their innovation and technology.

Why this matters:

To have a better shot at a job, being more attractive to where the majority of jobs are created (i.e., startups and entrepreneurial young companies) and knowing and understanding entrepreneurship can be a big plus.