Young Businesses Primary Source of New Jobs Creation

The Ewing Marion Kauffman Foundation released a study that shows newly created and young companies (those less than five years old) are the primary drivers of job creation in the US.  These companies are credited with creating nearly two-thirds of net new jobs in 2007. 

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

Net job growth is marked by churn, the process by which jobs are created and destroyed by shifts in the economy. Each year new companies emerge to create lots of jobs and are succeeded in subsequent years by a new pool of firms. The net effect of this is to consistently add two million new jobs to the economy each year.

“This study sends an important message to policymakers that young firms need extra support in the early years of formation so that they can grow into viable job creators,” says Robert Litan, vice president of Research and Policy at Kauffman.  “We must create an environment that aids firm formation and growth if we are going to turn employment around.”

Download the full report.