Young Businesses Are Critical to U.S. Job Creation, Report Finds

Company age is more significant than company size in determining the number of jobs a firm creates, with newly created and young companies serving as the primary drivers of job creation in the United States, a new report from the Ewing Marion Kauffman Foundation finds.

Based on an analysis of U.S. Census Bureau data, the report, Where Will the Jobs Come From? (17 pages, PDF), found that companies that were less than five years old created nearly two-thirds of net new jobs in 2007 and boasted a higher average number of jobs per company.

According to Kauffman Foundation vice president of research and policy Robert Litan, who co-authored the report, the message for policy makers is that young companies need extra support in their early years of formation so they can grow into viable job creators. That message is especially significant in light of the Bureau of Labor Statistics' announcement that the U.S. unemployment rate rose to 10.2 percent in October — the highest rate in twenty-six years.

"Job creation is the number one issue facing families and policy makers during this economic recession, and this study shows that new businesses and entrepreneurs are the key factor in adding new jobs," said Kauffman Foundation president and CEO Carl Schramm. "If the U.S. economy is going to have a sustained recovery, it will be up to entrepreneurs to lead the way."