Where do jobs come from?

I recommend listening to Rebooting America’s Job Engine, a podcast from Harvard Business Review Ideacast.  The guest, Henry Nothhaft co-wrote a book entitled, Great Again: Revitalizing America’s Entrepreneurial Leadership.

I look forward to reading the book.

Nothhaft says that he and his co-author tried to take a fact-based look at the connection between innovation and job creation.

He says recessions prior to 1990 had recoveries, in terms of employment, of about four months.  Post 90s, employment recovery has been taking longer.

His answer:  Fewer business start-ups are making it out of gestation to grow and add jobs.  He cites Kaufman Foundation study and Census Bureau data that show that all new job creation comes from business startups and that government regulation is “choking off the ability for small companies to start and succeed and create jobs in the U.S.”

One regulation he points out is the Sarbanes Oxley financial regulations.  He believes the costs of the onerous one-size-fits-all approach can be absorbed by larger organizations, but not by smaller organizations.

Some folks will point out some high profile growth stories that have grown large without adding many jobs, like Facebook.  I don’t necessarily buy that hypothesis. 

I believe cases like Facebook do not counter Nothhaft’s story.  It could be that the Facebooks are the only ones with enough momentum to get past the higher regulatory hurdles.

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3 thoughts on “Where do jobs come from?

    • Great point Justin. Think of just one example — minimum wage. Contrast Facebook to a retailer. Facebook doesn’t have as much need for low skill workers. It probably typically hires highly skilled programmers and operates in a wage market well above the wage floors set by the minimum wage. A retailer, on the other hand, depends more on entry-level workers and may not be able to afford the minimum wage.

  1. Pingback: Where do jobs come from? II | Our Dinner Table

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