Study contends startups, not older firms, are economic engine

[RamboLiberal]

If you mess with “Mom and Pop,” prepare for a swift spanking. Especially when so many small businesses are smarting themselves.

As President Barack Obama lobbies the Senate to pass his proposed $42 billion aid package to buoy small businesses, three economists are challenging what they call “the enduring notion” that firms employing less then 500 people “create the most private sector jobs.”

That maxim is “misplaced and wrong,” argues John C. Haltiwanger, a University of Maryland economist and an author of the study, published last month by the National Bureau of Economic Research. “If you think you ought to be targeting the groups that are creating the most jobs — and if you have a misleading target — then you are not going to achieve your goal.

..“Yet we have multiple quotes from every president since Ronald Reagan — and they have been supplied (this information) by the Small Business Administration — saying ‘two-thirds of net new jobs are created by small business,’” Haltiwanger added in a telephone interview. “It has been somewhat remarkable to us. Trying to beat back conventional wisdom is not so easy.”

After analyzing 29 years of Census business data, the economists found that when it comes to adding jobs to the economy, a firm’s age matters more than its size. They contend “young” trumps “small”: Startups account for 3 percent of the U.S. work force but fuel almost 20 percent of gross job creation.

http://www.msnbc.msn.com/id/39066877/ns/business-small_business/

[closeupready]

1. That makes sense - a start-up is risking venture capital for the potential reward of later success.

Older established firms, whether big or small, are less likely to take risks.

[KittyWampus]

2. Amen. And that is old news. 75% new jobs come from small/new businesses. Too many DU'ers lump

us in with multi-nationals.