

Start-ups account for *all* of net new jobs creation - c1sc0
http://www.kauffman.org/uploadedFiles/firm_formation_importance_of_startups.pdf

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cperciva
Alternative title: How to coerce statistics by defining variables creatively.

The author defines a "startup" as a company which has existed for less than 1
year and an "existing firm" as a company which has existed for 1 year or more,
and compares the net jobs created by startups against the net jobs created by
existing firms.

Consider a startup company which has 6 employees and goes out of business
after 20 months. It has provided 10 person-years of employment, but its _net_
job creation is zero -- two years after it was founded, it isn't contributing
anything to the employment numbers.

Under the definitions used in this report, however, that company is counted as
a startup with a net 6 jobs created... AND as an existing firm with a net -6
jobs created. This failed company which has no long-term effect on job
creation is counted not once but twice towards the job-creation superiority of
startups over existing firms -- and the more startups fail, the more skewed
the numbers will be!

Come on guys... startups are important enough in job creation without fudging
the statistics like this.

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krschultz
Very true.

To build on this:

-They define any business under 1 year old as a "startup". Is a new gas station a startup? A new cleaning business? A new home healthcare franchise? These are all new businesses run by entrepreneurs, but they are not "startups" in the way we generally refer to them on HN. I know several family members that have these kinds of franchise businesses and they never refer to themselves as owners of startups, but as owners of small businesses. Small distinction but lest the VCs and hackers say they create all the jobs, realize that the companies doing "established business" they so look down on are counted amongst startups in this data.

2) Common sense defeats their numbers. Who starts a startup with less than a
year runway? That would be ridiculous. If they change their numbers to count
startups up to age 3, what would this look like?

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c1sc0
"These are all new businesses run by entrepreneurs, but they are not
'startups' in the way we generally refer to them on HN." Isn't that just a
matter of semantics though? Would s/startup/newly incorporated business/g do?
I agree that their definition of startup certainly skews the statistics. More
interesting would be "Sum of total job-years by startups vs. established
companies".

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terra_t
This kind of study provides all sorts of opportunities for shell games, since
the classification of "startup" vs "established", or "new" vs "old" or "big"
vs "small" often obscures the real issues.

Just to take an example, imagine the person who cleans the lobby of a Fortune
500 headquarters lobby. This person could be a W2 employee of the big co, or
could be an independent contractor, or could be an employee of a small firm
(say 5-10 people) that does the cleaning, or could be an individual or small
firm that owns a franchise for a cleaning services business -- and thus be
something that's some kind of symbiotic association of a big co and a little
co.

The work that gets done is substantially the same, and it's done for the same
reason, but the benefits, tax consequences and how it shows up in economic
statistics is entirely different.

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ynniv
Better title: Companies that don't go out of business create the most jobs.

 _An important caveat is that existing firms are so diverse that it can be
misleading to think of a “typical” firm. For example, there are two simple
categories of existing firms: those that go out of business (Deaths) and those
that continue (Survivors). On balance, existing firms lose more jobs than they
create. But once Deaths are set aside, Survivors usually create more net jobs
than startups do._

I think they just proved that their own title is creative accounting. If the
goal is a policy change, this report shows that we can reduce unemployment
most effectively by keeping established companies open.

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zacharyvoase
I’m reminded of James Tauber’s blog post on ‘job creation’:
<http://jtauber.com/blog/2008/11/12/x_will_cost_y_jobs/>

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robertgaal
Argh PDF alert.

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c1sc0
Or do you mean scribd alert? ;-)

