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Wow! Startups drive most job growth in the United States, not big companies!

For an interesting article on the effect of capital on startup job creation, read this short summary of the findings pointing out that if we want to generate jobs, "we should be trying to get a million companies to start up tomorrow, rather than trying to coax existing companies to hire a million more people:" http://www.miller-mccune.com/business-economics/do-the-rich-really-make-all-the-jobs-36382/
Hat Tip: +Charles Daney.
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Christa Laser's profile photoEvan Swanepoel's profile photoChad LaFarge's profile photoRobert Crane's profile photo
37 comments
 
Sighhhhh . . If only start ups had the extravagant tax breaks and loop-holes the large corporations enjoy we would have LOTS of Jobs! Investing in Small Businesses is the way to go.
 
That's a terrific twist on the jobs issue, +Christa Laser : focus on the small businesses that don't exist yet. I'm encouraged by the notion that people are beginning to focus on small business.

With some common sense regulatory loosening I'd like to think we wouldn't have to create additional incentives to make a person step out and create a new business. I'm happy to hear about the new focus. Just loath to continually find new things for which the tax-payer should be on the hook.

Large corporations benefit in a competition sense from regulatory hurdles that trip up small businesses, as they have the legal teams in place to comply whereas a small business owner has to personally become an "expert" on each new bill that comes along.

Please update as you find news on this.
 
I would also say support fair trade and get out of the cycle of corporate control :)
 
The only problem i see with this is when some big companies move into a new area the small business people who sell the same things are usually put out of business because they cant compete with the larger business who has purchase power to buy goods cheaper for resale.
 
That is the whole point of supporting fair trade is to eventually push big business out of the market - yes they have the money to out buy us in bulk and undercut sales - but only until they have reduced the competition and then make us pay through our noses for everything - No fair trade makes sure that the poor sod working in the sun collecting the beans gets paid fairly too - I hope everyone goes this rout and soon - corporates have to much power and when they fold, so do a lot of other smaller groups - we should take back our rights to chose :) :)
 
I think Google should open up to some manufacturing and start taking big businesses out by giving the consumer what the want/need, while maintaining all that is great about google.
 
Monopoly is the biggest impediment for job creation.
But unfortunately we are witnessing exorbitant use of it around the globe.
Be a capitalist or socialist,all are same
 
Well if Google takes over, the monopoly may be the best thing for us all. Or maybe I love Google too much...
 
I welcome our benevolent Google overlords, but yeah, startups are hawt.
 
@ Tom i do agree
but cant help being a little skeptic
when i recall Socrates's words
"DEMOCRACY LEADS TO DESPOTISM"
Absolute control is never a good idea.
 
Small businesses have always been collectively the greatest job producers. No matter what the age is. Somehow over the years, the general public has lost that message.

Large companies typically become over-saturated, servicing areas that are no longer profitable, health/retirement packages that can not be sustained, changes are made = layoffs. Successful large companies evolved with market conditions. Those that don't, go out of business. Unless, you get a bailout.

Startups, have done several, is all need to fill immediate market demand. So of course it is nothing but job growth. Duh. However, that can be a very short cycle, hence the tight definition in the paper, it conveniently locks in the writers point of view. Once you hit saturation, it becomes a game of maintaining, exploiting the current to deeper levels of service developing new opportunities, not just doing work to keep busy- the pitfall of the large corp.

To say we need more startups is a bit short. What we need is a tax system that rewards individuals that takes that risk. One that makes continuing capital investing worth while. Better ability to deal with health cost. Helping all definitions of a business.

Any sharp small company can compete successfully against a bigger company. Service is always the key. Customers who don't care or have no option, will always take the cheaper large company route. Quality customers will always spend more for what they want and gravitate to the personal service a smaller company can offer.

On top of that, considering the poor condition of our education system, we need to produce qualified workers. From mechanics to rocket scientist. If I have to train everyone I hire down to the most minuscule detail, not going to do a lot of it. I'd rather pass on less profitable jobs.
 
It CAN be a good idea, we just have never seen it work out well... and I read this post from +Brian Fitzpatrick some time ago.
"We had a long conversation some years ago about how Google would behave to avoid being evil when we were big. We actually believe we have made those changes, steps and so forth. For example, we created the Data Liberation Front so we cannot capture or hold your data. If you wish to flee Google, we make it easy for you to do that with your personal data as well as your advertising data, so we think we've done the things to make sure we stay within an appropriate competitive box. We're certainly open to suggestions as to additional steps."

---Eric Schmidt, Congressional Testimony, 9/22/2011
 
Please note that if Google (or any other non-small-business entity) does a thing, then the Small Business isn't able to do it. Even the mighty and benevolent Google can stifle job creation.
 
But what I'm thinking of is Google "employs" every single person. They run the education system giving us the choice of a career path and the proper way to get to our goals, while being productive for everyone. It's basically socialism, but with Google in charge, it may work well.
 
Hehe. Well, +Tom Keaney, fear of dystopia is another way to convince people to support startup companies! Tell that to the politicians.
 
I was kidding, +Gordon Runkle; the best way to get politicians to support start ups is to write to your congress person telling them about this research. You can do it here now:
http://www.senate.gov/general/contact_information/senators_cfm.cfm
https://writerep.house.gov/writerep/welcome.shtml
They do listen, especially if you make it very easy for someone to check off a box, such as by saying in the header, "Favor Start-Up Funding Tax Incentives"
I'm doing it now! Votes will always be worth more than dollars.
 
If you want something pre-made to write to your congressperson, feel free to copy what I sent:
"I favor tax incentives to fund startups. This research article (http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1646934) found that start-ups create 3 million new jobs annually, whereas established companies on average lose jobs every year.
Rather than providing broad tax incentives based on income, congress should provide specific tax incentives to capital contributions."
 
Stop the Visa outpouring, many big companies complain not enough worker visas are being given out, Microsoft is a good example, companies would rather hire from other countries than from the US where they are located,
 
Agree, +Gordon Runkle. Look at the 50+ employee barrier you cite, and then compound that with poorly-thought-out regulation (SOX, anyone?) and you have a growth _dis_incentive.
 
+Chad LaFarge said "Please note that if Google (or any other non-small-business entity) does a thing, then the Small Business isn't able to do it. Even the mighty and benevolent Google can stifle job creation."

At one time Google was a small business, yet they quickly left others in the search business (Yahoo, Alta Vista, and others) in the dust. Yahoo was the big Kahuna in those days.

Facebook was a small business just 4 or 5 years ago. MySpace was the leader, Google was dabbling ineffectively in the area.
 
I agree tax incentives are a plus for start ups but an entrepreneur will build that will impact the world regardless of the tax codes. Tax reform of the infrastructure of innovation (higher education & universities) is what's needed. 
 
Aren't many of the great innovators college dropouts? ;)
 
Entrepreneurs need to create Benefit Corporations (aka: B Corps) structure. "This is a new class of corporation in several states of the United States, required by law to create general benefit for society as well as for shareholders."
 
I don't mean to be a wet blanket. But the SBA states that 90% of startup businesses fail in their first 18 months. If this is true in addition to the statement about startups creating the majority of jobs, then I can only conclude that most of these jobs are short-lived. Large companies may not create as many jobs, but they seem to be better jobs and more secure jobs. I welcome any figures that would disprove this hypothesis.
 
+Gordon Runkle would you care to elaborate. My premise is that most startups are short-lived. Therefore, for each one that is not absorbed by a larger company, the jobs would be lost as they fold up. Where is the non sequitur in my statement. Like I said, I welcome any relevant data. You provided no data, just a statement of refutation.
 
+Gordon Runkle ofwhich logical fallacy am I guilty? Are you asserting that assuming that my premise is correct, that the jobs will remain when the companies fold? I am drawing the conclusion that jobs will be lost (outcome) when companies fail (premise). Unless the SBA stats are in error, that follows. It is not whole cloth. It would be whole cloth if I spouted unsupported numbers. I am merely drawing a proportional number (most) from the number of startups 100%) and the number that the SBA says fail (90%). Your statement that I am wrong does not make me wrong. You are not making a logically coherent fact base argument. In fact, you are making no argument at all, just an assertion. If I am wrong, then tell me what is right. That is the proper response.
 
Even the article referenced in this thread states that startups (in their first year) are net jobs creators. It then goes on to state that all other groups, which would include my 1-2 year old companies (the ones that the SBA states fail) are net job losers. That seems to support both my premise and conclusion.
 
+George Hilbert I think that +Gordon Runkle's point is that the SBA does not indicate the size of the Small Businesses that fail. That difference being that a small business of 3 employees has a much smaller impact on employment numbers than one of 47 employees. "90% of small businesses" just isn't clear enough to make a judgement on how many jobs that takes away.

Is it safe to say that a small business that failed is more likely to have been one of 3-5 employees than one of 40-50? I just don't know.

Sorry to jump in to the middle of your conversation... it looked like the lines of communication were breaking down.
 
+Gordon Runkle you are correct. The premise adds no actual numbers. However, since the number of failed businesses is so high, I stand by my conclusion that a large number of jobs are lost. The original article made no statements about actual numbers of jobs and yet we accept that the jobs created are valid. I deserve the same leeway. The article states that all other groups of businesses are net job losers. So if we accept the article as fact, it also supports my conclusion. The preponderance of evidence presented here supports my conclusion, if we are going strictly by the information available to this debate. And if the people who lose one job move on to the next startup, they get counted twice or maybe many more times, although only one job is really created. Your statement supports my conclusion. Thank you

+Chad LaFarge Welcome....This is not "my" discussion. I think that whether they are small or "large" small businesses, they still contribute to a net loss of jobs when considered over their statistical average "life". The article would want you to believe that starting up a new company adds quality jobs to the economy. My only reason for drawing my conclusion was to question the quality of those jobs. All the evidence presented in this thread, including the article and the assertions of all parties point toward poor quality jobs being created in the first year of the average company's existence.

Ind for the record, I believe that most small businesses are of the 1-20 employee type. that is why the article suggests forming a million of them a year.

Yes, I do not make an airtight case. However, I think my conclusion is as good as the premise and the statement in the article allow it to be. Both the premise and the article come from seemingly credible sources.
 
And you are invalidating my conclusion without presenting any evidence to the contrary. I do not have any burden of proof when questioning a statement that presents no facts. The authors of the article stated that jobs are being created. The burden lies with those making that assertion to show that the jobs are "real" and not just numbers on a page. Do you really believe that when someone moves from job to job multiple jobs are being created? That is the only thing you said that I said appears to support my conclusion. I fear the lines are pretty clear. We may have to just agree to disagree on this.
 
+Gordon Runkle I believe I supported it sufficiently. You do not think so. That is what "agree to disagree" means. You are correct. There is no point in pursuing the discussion further. Anyone reading this can just take it as input and draw their own conclusions. Some may draw a hard line on the rules of debate and others may see validity in what I am trying to get across. I have served my purpose. I sincerely hope you have served yours.
 
+Anthony Park you sir, are someone I think I could have a meaningful and fruitful discussion with.....:)
 
+Gordon Runkle B Corps will support their "purpose" by making decisions that will legally and transparently make a positive impact to their employees, community and environment. The bigger question isn't why we "need" this but rather why not.
 
+Anthony Park corporation is merely a certification of a company that can be incorporated as an LLC or a C corporation or a S Corporation (which is a C Corporation that elects a special status under Subchapter S of the IRS code). You may want to visit: http://www.bcorporation.net/
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