…[John] Haltiwanger has been trying to set things straight on the question of which firms are creating jobs, most recently in a paper with the catchy title, “Job Creation and Firm Dynamics in the U.S.”
Haltiwanger starts out by noting that in an economy with about 110 million private sector jobs, firms create and destroy 15 to 17 million jobs in a typical year. This churning goes on in all industries and all sizes of firms ”” it even goes on within the same firm ”” and what drives it is the the constant shifting of work from the least productive firms and factories and stores to the more productive.
For many decades, the U.S. economy has been more effective at this process of “creative destruction” than almost any other country in the world. And what Haltiwanger and his collaborators have found over the years is that young firms ”” business startups and a small number of new firms that grow very quickly ”” have played an outsize role in that process. In job creation, it turns out, it is not size that matters but the age of the firm. Small businesses don’t create all the new jobs ”” young ones do.