Economists found that young start-up businesses are key drivers of economic growth, yet the American workforce has concentrated on older and more mature firms.
The U.S. Census Bureau’s Business Dynamics and Statistics (BDS) in recent findings, which describe the dynamics of the U.S economy over the past 40 years, suggest the job creation rate is notably higher for young firms than for old ones.
According to the BDS, the Net Job Creation Rate (NCR) has hovered around 15 percent to 20 percent for younger firms throughout the time series but was roughly 0 percent and often negative for more established firms.
Since the mid-2000s, small firms created more jobs on the net than larger ones, but in the area of Retail, large firms have mostly out-performed small firms in net jobs created, according to the BDS.
Prior research suggests that the age and size of businesses are characteristics that may reflect their potential for economic growth.
Economists define the age of a firm is as “the age of the oldest establishment in the first year in which a firm has employees”. Firms with 100 or more employees are considered “large,” and those who are “small” have fewer.
A start-up is defined as any firm that employed its first worker in the current year.
Christopher Goetz, an economist in the Center for Economic Studies (CES) at the U.S. Census Bureau, and CES Senior Economist, Martha Stinson reported that the share of employment at more mature firms steadily increased after falling in the 1980s, representing approximately 90 percent of all employees by 2019.
The Accommodation and Food Services, and Information sectors saw a trend opposite of this, with employment rates dipping lower than the late 1990s and not rising until early 2010, stagnating or slightly declining since then.
Restaurants and hotels saw a lower share of employment in older firms relative to other industries during that time series, according to the report.
Although there is an increased presence of employment at older firms, economists say that startups are “the engine of economic growth,” as “young firms are more dynamic and have much greater rates of net job creation,” the report read.
"It is simultaneously true that startups grow at faster rates but old firms account for an increasing share of employment," the report read.
In early February, San Diego County Board of Supervisors approved making 1,550 grants totaling $3.8 million, funded in part by the California Office of the Small Business Advocate, to support some of the smallest businesses county-wide impacted by the COVID-19 pandemic.
The first application process will run through 5 p.m. on March 31. If there is grant money left after the first round, additional application periods will be held.
