Wednesday, February 22, 2012

- Small Business "Hot Air"



Now that my daughter is getting older, my wife has decided to go back to work part time. Since it wasn't a question of her salary being the most important issue, she took a job that offered a lot of flexibility and convenience. But she's vastly overqualified for it, and is making much less than she would in a role more suited to her experience. That's OK with her. No complaints.

But one thing she learned very quickly was that very often a small business is small because the person running it, isn't running it very well. Her boss is a very nice person, but is a relatively incompetent manager and is absolutely awful under pressure. She's owned her business for years and even though it's an industry which offers many economies of scale, she hasn't been able to make the firm grow beyond a few people.

Here then is the point. Sometimes, small businesses don't actually create many jobs even though politicians believe they should. In reality the only firms which do create lots of jobs are those that are new, and are being run by someone who will inevitably be in the 1%.

Haltiwanger and two other economists showed, in a study of 32,000 companies over 30 years, that small businesses no more than five years old - that's about 40 percent of them - are the only ones that create more jobs each year than they cut.

In 2005, for instance, more than 99 percent of the 2.5 million net new private-sector jobs in the United States came from these startups, according to the U.S. Census Bureau.


Which of course means that they only create jobs by being what Team Obama thinks, is a part of the problem.

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