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November 6th, 2009 5:57 pm
When Creating Jobs, Look at Company’s Age, Not Its Size

There’s a fascinating article in today’s Wall Street Journal discussing the best way for government to help spur job creation.

Unfortunately, in troubled economic times the language of recovery is too often tilted toward large, established companies or to “small businesses,” a broad term that traditionally applies to businesses with fewer than 500 employees. The conventional wisdom is that such businesses account for half of the labor force and are therefore the engine of future job creation.

That’s not quite the case. The more precise factor is not the size of businesses, but rather their age. According to the Census Bureau, nearly all net job creation in the U.S. since 1980 occurred in firms less than five years old. A Kauffman Foundation report released yesterday shows that as recently as 2007, two-thirds of the jobs created were in such firms. Put more starkly, without new businesses, job creation in the American economy would have been negative for many years.”

The article by three experts at the Kauffman Foundation targets four measures needed to “create incentives to foster the creation and growth of new businesses.”

• First, welcome immigrants seeking scientific training at American universities by creating a “job creator’s” visa for immigrants who have founded a company in America and demonstrated they have at least one employee.

• Second, unleash America’s academic entrepreneurs by allowing university professors to commercialize ideas outside of their home university’s technology licensing office.

• Third, provide easier access to capital so that more flexible standards would allow prudent lending, when it is sorely needed by many firms to remain alive or meet demand when it begins to grow.

• Finally, make it easier for companies seeking capital to go public by allowing shareholders benefited by Sarbanes-Oxley to vote on whether or not they want to comply with all of the law’s (costly) requirements.

You can read the entire article here.

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