Study: All net job growth in the U.S. since 1977 has come from startups

There was an interesting piece in the HBR blogs a few days ago that was written in response to President Obama’s State of the Union speech – specifically, the part about job creation. The author takes note of how job creation in since 1977 has been entirely due to startups, but that the President’s go-to crew for ideas on how to foster growth consist of all the wrong people for the job.

Harvard Business Review: Looking for Jobs in All the Wrong Places: Memo to the President

According to a recent study by the Kauffman Foundation, for example, all net job growth in the U.S. since 1977 has been due to start-ups. The data show that if you took start-ups out of the picture and looked only at large established firms, job growth in the U.S. over the last 34 years would actually be negative.

“When it comes to U.S. job growth,” said Kauffman Foundation economist Tim Kane in his report, “start-up companies aren’t everything. They’re the only thing.”

In your address last night, Mr. President, you correctly noted that, “The first step in winning the future is encouraging American innovation.” Here, too, start-ups are the driving engine of our nation’s global innovation leadership.

It is startups who have generated virtually all of our nation’s major technological breakthroughs in the last hundred years — from cars and planes to semiconductors, PCs, software, and the Internet — and in the process sparked the creation of whole new industries and millions of new jobs. And as economists have demonstrated, this kind of start-up-led innovation is the source of virtually all economic growth and increases in living standards in the U.S.

In other words, Mr. President, everything depends upon start-ups: Job creation. Our standard of living. Our prosperity as a nation. The American Dream itself.

So if the target of national policy is job creation, then the bullseye of that policy must be centered on startups. Yet policy makers in both parties continue to aim at the wrong target.

Last month, Mr. President, you held a summit meeting with 20 of the nation’s top CEOs to look for ways to spur job creation. But Fortune 100 CEOs are exactly the wrong people to talk to about jobs. Big Business is not a major job creator. Indeed, as one commentator put it, the guest list at this summit meeting represented “a who’s who of outsourcing American jobs.”

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