President Obama recently hit the road to gain support for his new economic stimulus proposals, including billions in aid to small businesses — calling small businesses "the places where most new jobs begin."
Long touted as the backbone for the U.S. economy, politicians from both the red and blue corners have supported small business growth as the way to keep the nation’s financial health humming.
Thus, John C. Haltiwanger, a University of Maryland economist and an author of a study published last month by the National Bureau of Economic Research, is making himself wholly unpopular as he beats back the notion that small employers are most responsible for job creation, and the secret to salvaging the U.S. economy.
According to reports at msnbc.com, Haltiwanger and two colleagues analyzed some 29 years of Census business data and found that when it comes to winning the job-creation race, size doesn’t matter so much as youth.
For example, although startups account for just 3% of the nation’s workforce, they fuel almost 20% of gross job creation.
More established small employers balk at Haltiwanger’s findings, msnbc.com reports. "The reality is most small-business startups are a joke. They typically never employ anyone, and fail within five years," Ren J. Carlton, president of 11-year-old Dynamic Advisory Solutions, a Troy, Mich., business consulting firm with 10 employees, told the site. "More established businesses — like mine — have weathered storms and have passed the test of time. If the government decides to start subsidizing business startups, it will simply be a waste of taxpayer dollars."
Although Haltiwanger and his coauthors concede that after five years, about 40% of the jobs created by startups go up in smoke, they still argue they are the growth engine the economy sorely needs. As Haltiwanger tells msnbc.com plainly: "Microsoft and Apple and Wal-Mart, for that matter, were startups at some point and took off."
Do you give any credibility to Haltiwanger’s findings? Who would you place your money on to spur job creation going forward — Mom & Pop or the next Microsoft?
Share your thoughts in the comments.
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