Where do jobs come from?
According to Kaufman Foundation research, a high percentage of newly created jobs come from young, small companies. Even excluding startups, the Kaufman Foundation reports that two thirds of the 12 million jobs added to the U.S. economy in 2007 were at firms less than five years old. One of the inherent problems with new companies serving as the main source of job creation is that new businesses fail at an enormously high rate. Depending on which research you pull from, somewhere between 50% to 80% of new ventures don't make it to year five. Which means that a large percentage of the new jobs created by young firms are also lost within a few years. Even more problematic than the high failure rate of young companies is the fact that each individual small business hires only a handful of new employees. What this means is that for a broad-based recovery in employment to occur we not only need new small companies to sprout up, but we need a lot of them.
The fact that historically there is an increase in startup ventures when unemployment rises suggests that at least some new businesses are being formed solely due to the recession. Which raises an interesting question.
Is high unemployment a necessary, albeit painful, part of the economic cycle that leads to innovation and growth?
If we reframe high unemployment as an economic growing pain that creates jobs while serving as a catalyst for the development of new products, services and technologies, it becomes clear what we should be doing. Starting companies.
And lots of them.
So how exactly do you become an entrepreneur? Here are some tips I cover in my new book, "Shake the World" [Portfolio Hardcover, $25.95].