Charles Gascon, an economist at the St. Louis Federal Reserve, has stated that although startups are responsible for creating many jobs in the US, they often do not last. Despite accounting for a large portion of the jobs created from 2020 to 2021, the net job creation for startups is small and sometimes negative due to the high likelihood that they close down within five years, often due to low pay.

Gascon noted that while many people assume most of these startups are tech companies, in reality, tech startups make up a small segment. A significant portion of startups are actually restaurants, small businesses, and professional service firms like law or accounting firms. The composition of startups reflects the broader industry composition of the US economy, with exceptions in industries with high barriers to entry such as manufacturing or utilities production.

In addition to startups, businesses that have been around for at least 11 years have also contributed positively to the growing economy during the COVID-19 pandemic years. While there was positive net job creation from these businesses, it did not show up in the same way because many large firms laid off workers due to the pandemic and then started ramping up.

According to the Federal Reserve Bank of St. Louis, startups account for only about 2% of total employment in the US economy. However, despite their small percentage in terms of employment, Gascon emphasized that startups play a crucial role in driving innovation and economic growth by creating new products and services that meet emerging consumer needs and preferences.

Overall, while startups create a significant number of jobs and contribute positively to economic growth, their high likelihood of closure within five years and low pay contribute to small and sometimes negative net job creation.

By Editor

Leave a Reply