The Hudson Institute, an economic policy research organization, published a study earlier this month titled “The Collapse of Startups in Job Creation,” which analyzes the decline of entrepreneurship and employment opportunities in those startup companies in the United States during the past 30 years.
Tim Kane, Hudson Chief Economic and founder of the social networking firm StoryPoint, is the study author, who found that job creation at firms that are less than a year old has hit an all-time low. Compared to the average three million jobs created each year since 1977, the latest annual data suggests that number fell by 20 percent to 2.34 million jobs in 2010.
Since 2009, the average number of startup jobs has been 7.8 per 1,000 Americans. During the administration of President George H.W. Bush, that job figure was at 11.3. In the President Bill Clinton years, the number fell slightly to 11.2. Throughout the entire eight years of President George W. Bush’s two terms, the amount dropped again to 10.8. With President Barack Obama in power, the statistic has fallen to 7.8.
“Entrepreneurship is down by a third these last four years,” stated Kane in a press release. “And the decline continued in 2010 and 2011, even after the economy started growing. Without startup job growth, there simply won’t be overall job growth in the United States.”
It is believed among neoteric economists that in this modern age of advanced technology, more wealth and a shift to service instead of manufacturing or agriculture there would be more entrepreneurship. The data suggests otherwise.
Why is this happening? In the report, Kane notes the higher taxes, economic uncertainty, political instability, present and future regulations, such as the Affordable Care Act (Obamacare), and occupational licensing regimes. Economic Collapse News reported last week of another study that found Americans and businesses are paying approximately $1.8 trillion annually just to abide by federal regulations.
In order to stay in business, companies have to hire lawyers, compliance officers, accountants, administrative clerks and others to make sure they are following the requirements of federal, state and local departments.
Furthermore, a lot of entrepreneurs tend to hire independent contractors or part-time workers rather than full-time employees. This is a common practice among business owners in the startup stage, but since 2009, the Internal Revenue Service has cracked down on these measures.
Other factors for this weakening of entrepreneurship could relate to the success of national chains. According to the Census Bureau’s Business Dynamics Statistics (BDS), each time a small business is opened, it is considered a startup. However, each time a brand new Subway, McDonald’s, Wal-Mart or Barnes & Noble opens up it is not deemed as a startup, but rather an “establishment.”
“By cracking down on employing Americans part-time, and mandating higher benefits, new American policies may be pushing jobs overseas,” wrote Kane in the report. “This is an issue policymakers must consider carefully when designing rules and regulations for the 21st century.”
In the end, there doesn’t seem to be any respite in sight for business owners and the enormous amount of regulations they have to follow. Although President Barack Obama has written five percent less regulations than his predecessor, his administration has imposed many. Forbes noted that because of Obamacare, the Dodd-Frank financial reforms and the free reign of the Environmental Protection Agency, businesses in certain sectors have been reluctant to enter different markets or have simply gone out of business.
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