Small businesses may not each employ a huge number of workers, but when added together, they are believed to represent all of the country’s job growth – showing that the path to growth may lie in encouraging entrepreneurs tostart an LLC or corporation.
The results of a new study by the Ewing Marion Kauffman Foundation say that between 1977 and 2005, new companies created an average of 3 million new jobs per year, while older companies lost 1 million per year. The same trend was also seen in 75 percent of the individual years evaluated in the study.
“Policymakers tend to focus on changes in the national or state unemployment rate, or on layoffs by existing companies. But the data from this report suggest that growth would be best boosted by supporting startup firms,” said Robert E. Litan, vice president of research and policy at the Kauffman Foundation.
The study also found that job growth at startup companies was consistent and resistant to economic recessions, while older firms struggled to gain jobs during tougher financial times.
The results of the study place an even greater importance on the small business legislation currently being considered in the U.S. Senate, which aims to encourage small business investment and lending in an effort to promote job creation.
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