New businesses have been responsible for creating a significant number of jobs in the United States, but economist Charles Gascon from the St. Louis Federal Reserve warns that these jobs often don’t last. According to Gascon, most of the jobs created from 2020 to 2021 are from startups or new companies. However, net job creation for startups is small and sometimes negative due to the high probability of closing within five years, often due to low pay.

Gascon notes that many people assume that most of these startups are tech companies, but in reality, tech startups make up only a small portion of this segment. A large portion of the startups are actually restaurants, small businesses, and professional services firms like law or accounting firms. The composition of startups reflects the broader industrial composition of the United States, with exceptions in industries with high barriers to entry such as manufacturing or utilities.

In addition to startups, businesses that have existed for at least 11 years have also contributed to the growing economy during the years of COVID-19 pandemic. While there was positive net job creation from these businesses, it didn’t show up as much as many large companies laid off workers due to the pandemic and then started to grow.

According to Gascon, while startups account for only about 2% of total employment in the US economy, they still create a significant number of jobs. However, he notes that these jobs often don’t last due to their high probability of closing within five years and low pay. As such, while new businesses continue to create jobs in America, it is important for entrepreneurs and policymakers alike to consider how these jobs can be sustained long-term.

By Editor

Leave a Reply