How important are startups to job creation? VERY!

A very interesting study was just released by the Census Bureau analyzing job creation at startups.

"The fraction of employment accounted for by U.S. private-sector business startups over the 1980-2005 period is about 3 percent per year...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 U.S. net employment growth rate is negative on average.

For micro firms (firms with one to four employees), the percent of jobs in any given year accounted for by business startups is very large— about 20 percent on average. For substantially larger firms (firms with 250 to 499 employees), the percent of jobs in any given year accounted for by business startups is considerably smaller— about 1.3 percent of employment in this firm-size class. This is still substantial relative to net employment growth for the size class."

So maybe instead of constantly extending unemployment benefits and bailing out huge auto companies and insurance behemoths, the government should work to incentivize the creation of small businesses. Free laptops, internet access and office space courtesy of Uncle Sam for any new startup in 2010? Just sayin'.