Saturday, December 20, 2008

Census Study: Politicians do NOT create jobs

A new division of the Census has started gathering data on job creation and business start-ups. The stats show that small business start-ups are the major source of job creation. Duh!

I understand that Phil Bredesen and his fellow politicians want us to love, admire, revere and most importantly VOTE them for "creating jobs" but the facts show that jobs are created by small entrepreneurial start up firms. The same firms that go about their business without Phil Bredesen ever once showing up for a photo op. As these stats become more widely known, I am quite sure the politicians will try to take credit for them but, in fact, their best course is to stay the hell out of the way and blow their hot air elsewhere.

One novel feature of the BDS is that business startups (new firms) can be tracked on a comprehensive basis for U.S. private, non-agricultural businesses. The fraction of employment accounted for by business startups in the U.S. private sector over the 1980-2005 period is about 3 percent per year. This measure is interpretable as the employment-weighted business startup rate for the U.S. While this is a small fraction of overall employment, all of this employment from startups reflects new jobs. As such, 3 percent is large compared to the average annual net employment growth of the U.S. private sector for the same period (about 1.8 percent). This pattern implies that, excluding the jobs from new firms, the net employment growth rate for the U.S. is negative on average. This simple comparison highlights the importance of business startups to job creation in the U.S.