Young Businesses, Not Small Ones, Drive Job Growth

From the Wall Street Journal:

It’s not size that matters — at least when it comes to job creation. The age of the company is a bigger factor.

The Federal Reserve Bank of Chicago’s Jason Faberman on Monday became the latest in a long line of economists to unpack the misconception – promoted frequently by elected officials — that small businesses are the key to creating new jobs in the U.S.

It’s a subset of small firms—young, innovative companies—that lead in job creation. “It’s the new guys, not necessarily the small guys, that generate growth,” he said at the National Association for Business Economics policy conference in Arlington, Va. “The focus for policymakers shouldn’t be on small business job growth, but on new business formation.”

Nearly 90% of U.S. firms employ 19 or fewer workers. Those smaller firms create jobs at nearly twice the rate of larger companies. Controlling for the age of the firm, Mr. Faberman found the strongest job growth came from firms that were less than four years old.

http://blogs.wsj.com/economics/2014/02/24/say-it-together-young-businesses-not-small-ones-drive-job-growth/?mod=WSJBlog