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Economist from the St. Louis Federal Reserve explains that while business startups generate numerous jobs, they frequently struggle to survive.


Nov 21, 2023

According to a St. Louis Federal Reserve economist, business startups are responsible for creating a majority of the jobs from 2020 to 2021, but they often do not last. Charles Gascon stated that despite these new companies creating many jobs, the net job creation for startups is small and sometimes even negative due to the high likelihood of them closing down within five years, often because of pay-related issues.

Contrary to assumption, Gascon revealed that most startups are not tech companies, but are actually small businesses such as restaurants, or professional service firms like law or accounting firms. He also added that the composition of startups mirrors the broader industry composition of the United States, with the exception of high barriers to entry industries such as manufacturing or utilities production, where it is not easy to get started without a large capital infusion.

Additionally, Gascon mentioned that businesses that have been around for at least 11 years also contributed to the growing economy during the COVID-19 pandemic years, leading to a big positive net job creation. The Federal Reserve Bank of St. Louis reported that startups account for about 2% of the total employment in the U.S. economy.

Despite these contributions, Gascon suggested that the small net job creation from startups and negative job creation in some cases, raises questions about the long-term viability of these businesses. This news was reported by Missourinet in 2023.

By Editor

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