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links for 2011-07-13


Jobs, Jobs and Jobs

“Where are the jobs?”

It’s the billion dollar question right now. Two years after the recession officially ended the United States still finds itself with 9%+ unemployment and almost 20% underemployment, with no end in sight:

But we’re two years into a recovery, maybe the jobs are just around the corner:

Okay, jobs aren’t around the corner. It looks like businesses are standing pat, a few are expanding, but at least most the bleeding is done. Maybe what we need is to encourage businesses to start hiring people. Existing businesses provide the best opportunity to increase employment, right?

Guess not. Looks like existing firms are not drivers of new employment opportunities. Startups are. In fact, this fits in with another graph I have:

Jobs come from a healthy mix of large, small and medium size firms. So no matter what we do, we can’t rely on large businesses to pick up slack in the job market, and we can’t rely on existing firms (it’s unlikely, but there might be large startups, so I can’t use the terms ‘small business’ and ‘startups’ interchangeably)

So we need small businesses and new startups (new startups almost always being new small businesses). How are we doing?

Not good. In fact, it’s the worst new business environment since I was in grade school.

Maybe a smaller number of new businesses means they’ll be bigger and thus will pick up the slack and we can all expect to get work very soon:


What’s the end result of all of this?

We’re fighting over fewer jobs:

Or we’re leaving the workforce:

(That’s workforce participation)

Okay. That’s all bad. But I’m sure the reason all of this is happening is because of greed. The reason banks aren’t investing is because they love their money, not because business startups are inherently risky:

So there’s a 50% chance a new business dies within five years.  Businesses that die don’t provide investors with income. Which means anytime a bank or investor decide to put down a bunch of money on a new business, they don’t see a return and are at risk to lose thier entire investment HALF the time.

Maybe there’s a magic bullet. If we increase government spending as a percent of GDP, perhaps we can increase GDP with some sort of magical Keynesian multiplier aggregate monkey banana effect:

It’s not that hard folks. The US economy has historically been a healthy mix of small, large and medium size firms. We need all three. The economy has relied on startups, new businesses, to create jobs. Existing firms don’t do a good job of creating jobs because many don’t have any growth potential. Often, existing businesses become more competitive and profitable by downsizing their workforce. New companies can take advantage of this by picking up new employees with real skills and putting them to work providing goods or services to customers who were otherwise not having their wants fulfilled by existing firms.

Because investing in a new business is risky, the rewards need to be high for the investor. This means there has to be a sensible tax policy that allows those who risked their capital to keep most of their earnings.  In order for people to even pursue new businesses though, in new areas where there are few competitors (niche goods or services providers), there has to be an easy to navigate regulatory structure (something under 90,000 pages) that allows new businesspeople to actually risk years of their lives and lots of their money with the confidence they won’t go to jail for selling flowers or rabbits (seriously, the government has put people in jail for that sort of thing). Also, the government should make it easy to hire people (you know, by not making it onerously expensive to hire anybody because of health insurance requirements or payroll raxes).

Finally, we need a citizenry that will not only take risks, but has the requisite skills to succeed running their own businesses (people who didn’t spend four years of their lives getting a worthless degree in RoboAmerican Studies, or Sociology or something) and can do math and stuff.

Yeah, it’s fun to dream.