Kauffman: Small Biz Starting and Staying Small

August 1, 2011

The Kauffman Foundation recently published a report, Starting Smaller; Staying Smaller: America’s Slow Leak in Job Creation, which warns that small businesses are being launched with fewer employees than the historical norm and are staying smaller than expected, even during periods of economic growth.

The study found that the trend began, at a minimum, in the middle of the last decade, well before the most recent economic downturn. The recession has exacerbated the situation, however. According to the report, the cohort of firms started in 2009, for example, is on track to contribute close to a million jobs less in its first five to ten years than historical averages.

Analyzing information collected by the U.S. government, including published and unpublished data from the U.S. Census Bureau’s Business Dynamics Statistics (BDS) program and the U.S. Bureau of Labor Statistics (BLS) Business Employment Dynamics program, the report found that: “Employer businesses have been starting in fewer numbers, with fewer employees, growing slower, and, therefore, generating increasingly fewer new jobs for the U.S. job market.”

The implications of this trend clearly are troubling for an American economy historically dependent on small-business, start-up job creation. As a 2010 Kauffman report found, “Job growth is driven, essentially entirely, by startup firms that develop organically.” Please click here for more information.

Given the indispensable role that small-business startups play in job creation, it is imperative that Congress and the administration focus more intently on the small-business credit crunch and other barriers to small-business job creation.

Please click here to view the full Kauffman report, Starting Smaller; Staying Smaller: America’s Slow Leak in Job Creation.