Employment by Young Firms

The Census Bureau’s Business Dynamics Statistics (BDS) program defines “young firms” as those less than three years old. I want to present some data on such firms today, specifically the total employment they represent. But first some context. One of the things you learn in looking at the world through the lens of statistics is that this lens tends to complete one’s view of economic reality—and frequently to correct misconceptions that arise in political debate. One of these is that small business (and young firms are predominantly small) is the engine of the economy, not least of employment growth. Small businesses do make a positive contribution. They also destroy more jobs than big business does. I made that case a while back here. Today a look at the employment that young firms actually account for, and this state by state.

This graphic appears in a BDS statistical brief accessible here. The highest percentage is achieved by Nevada, about 11 percent of total employment. The lowest percentage, a little over 5 percent, is by the District of Columbia. What surprises me in that case is that it is as high as that. The regional distribution of share here is fascinating in itself. A better look at regionality is provided by the following map:

The source of this map, also BDS, is here. What this map reveals is that political alignments across the nation echo the entrepreneurial activity as viewed through a lens that highlights the employment-growing powers of young firms, however fractional that contribution is to the total.