THE BLOG
09/06/2012 01:16 pm ET Updated Nov 06, 2012

Entrepreneurs Are Job Creators

The entrepreneurial spirit of the American public is one of our country's last great resources. As the national unemployment rate hovers around 8 percent, our strongest competitors continue to outpace us in education and macroeconomic stability. Helping to keep America afloat in an increasingly competitive global economy is our willingness to start new business ventures -- an asset that, despite only producing a slow jobs "leak," has nearly single handedly kept unemployment from spiraling out of control. Indeed, entrepreneurship is the best answer to the question of how to solve our unemployment problem.

Entrepreneurship has been the driving force of American employment for decades: from 1980 to 2005, new firms (those less than five years old) were responsible for close to all net job growth in the United States. According to the Business Dynamics Statistics data from the U.S. Census Bureau, America's net employment growth rate would be negative without the jobs created by new businesses. And though not every new business can succeed -- in fact, only half of all new firms make it to their fifth year -- cohorts of firms started each year retain, on average, 80 percent of their initial total employment to age five, according to a report from the Kauffman Foundation.

Unfortunately for the U.S. economy, what was once a stalwart of steady job creation has declined in recent years. Historically speaking, new firms generated around 3 million jobs a year, but this number dropped to 2.3 million during the recession. The issue stems from a slow jobs "leak," a result of new businesses starting up with fewer employers, and adding new workers more slowly over time. This trend of less "employer businesses" predates the recession, demonstrating that defeating unemployment has less to do with opening a new manufacturing plant than encouraging young, small businesses to alter their employment patterns.

Fortunately for all Americans, the term "job creator" knows no class or status -- the only requisites are an education and a strong work ethic. A Duke University survey of 549 company founders of successful businesses in high-growth industries (such as aerospace, computing and electronics) found that over 90 percent of the entrepreneurs came from middle-class or upper-lower-class backgrounds. When these entrepreneurs were asked what barriers they encountered on the way to success, 98 percent cited a fear or inability to take risks. Potential entrepreneurs, therefore, should be made aware that more than half of the companies on the 2009 Fortune 500 list were launched during a recession or bear market. Thus, recessions do not necessarily appear to have a significant negative impact on the formation and/or survival of new businesses. In general, job created by startups are less sensitive to economic downturns than the rest of the professional world.

As Americans from all walks of life look for work, the long-term answer resides in creating brand new jobs in brand new companies, as it has always been. A redoubled effort in innovation and entrepreneurship will be crucial in aiding the American economy, which fears possibly being eclipsed by China as the world's largest trade nation by 2030. Current successful entrepreneurs know the hard work and dedication that starting a company requires; they also know that the reward -- creating jobs for themselves and others -- greatly outweighs the risk. Because when it comes to starting a new business, you are not only paving your own path to success, but you are helping others to do the same. And as the latest numbers show, with a national unemployment rate of 8.3 percent (as of July 2012), this country needs bold, determined people more than ever.

Zach Cutler is an entrepreneur and is founder and CEO of The Cutler Group, a U.S.-based tech PR agency. A member of the Young Entrepreneur Council, Zach specializes in crafting innovative PR campaigns to help innovative tech companies and startups thrive. He can be reached at zach@cutlergrp.com.

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