Joeventures

lyrecalliope:

“The only firms that create jobs on average are brand new ones.”

Interesting notion. I think this is a gross oversimplification, but I’m going to ignore this and say I agree with the conclusion wholeheartedly!

I agree that the report is an oversimplification. As the study authors note, new firms have a “definitional advantage” in that firms in their first year cannot lose jobs compared to the previous year. If the authors were to measure business failure, however, the picture would look far different — young firms are notorious for failure.

Many small firms also could be so small that they’re founded by an entrepreneur who is also running several other firms. Perhaps you’ve heard of (or know someone who personifies) the anecdote of the entrepreneur with three or more businesses all in his back pocket. All three business are legally registered with the State and employ that same person.

One person, three jobs.

As long as labor statisticians focus on job creation and destruction, they’re always going to look at distorted numbers.