Study: New businesses, not just small ones, key to job growth

By David Markiewicz

The Atlanta Journal-Constitution

Small business long has been held out as the biggest job creator in the American economy. But a new study says that a company's age, not its size, is the most important factor in creating jobs.

The report, which used U.S. Census data, says it's actually young firms -- those 1 to 5 years old -- that add the most jobs. Some, but not all of those young firms are still considered small businesses.

Commissioned by the private, non-partisan Kauffman Foundation, the study says 8 million of the 12 million jobs added in 2007  were created by young firms. It also said those companies created the highest average number of jobs, about four per year per business.

The study's authors said the distinction between small businesses and new ones has public policy implications. They argue for: cutting payroll taxes; helping immigrants seeking scientific training or trying to launch companies; helping academic entrepreneurs commercialize their innovations; and aiding the ability of firms to borrow.

Dane Stangler, one of the authors, said that while young companies are responsible for the most job destruction as well as the most job creation, "there is a positive net effect."

Stangler said "a substantial set of rapidly growing businesses" accounts for a "disproportionate share of net job creation."