One of the dominant trends in the U.S. economy in recent decades is the concentration of economic power in larger, established firms. Since the late 1970s, the share of startup firms in the economy has dropped from nearly 14% to just above 8% today. With fewer new businesses relative to established businesses, the U.S. economy loses out on the benefits that new businesses can provide, including innovation and economic dynamism.
Older, larger firms’ power also has implications for the labor market. A recent study from the U.S. Department of the Treasury reported that established firms hire fewer employees and pay wages roughly 20% lower than they would in a more competitive market. The concentration of power among fewer larger firms also makes it more challenging for workers to move to new firms, which further impedes new business creation and growth.
These dynamics have made it more difficult for startup businesses to live up to their reputation as an engine of job creation. As larger firms’ market power has grown, the share of jobs created by new businesses has fallen significantly. The share of total employment at newly-opened businesses neared 8% in the late 1980s, but today, new firms employ just 3.9% of the total labor market.
Certain industries see the effects of these trends more than others. New employers in utilities, manufacturing, and educational services generate less than 2% of total employment in those fields. These industries tend to have higher barriers to entry, making it harder for new businesses to get established and grow. In contrast, the top industries generating jobs from new businesses include real estate and rental and leasing, accommodation and food services, and administrative and support and waste management and remediation services. New businesses are responsible for more than 5.5% of total employment in each of these industries.
In addition to varying by industry, job creation from new businesses also looks different across the country. Economic, demographic, and public policy differences across cities and states can create better or worse conditions for new businesses to thrive. For example, Delaware leads all states with 5.6% of total employment at recently-opened businesses, which is likely attributable to the state’s business-friendly legal structures.
Other states that rank highly include Florida and Texas, which have growing populations and low tax rates that appeal to entrepreneurs, and California, which has a well-educated workforce and is a hotbed for startups in fast-growing technology fields. At the metro level, these three states together account for 10 of the top 15 cities with the most job creation from new firms.
The data used in this analysis is from the U.S. Census Bureau. To determine the locations with the most jobs created by new businesses, researchers at HireAHelper calculated the share of total employment attributable to business establishments that opened in the past 12 months. In the event of a tie, the location with the greater total employment at newly-opened businesses was ranked higher.
The analysis found that newly-opened businesses employ 5.1% of the workforce in Florida—a total of 436,751 employees. Out of all states, Florida has the 2nd most jobs created by new businesses. Here is a summary of the data for Florida:
Share of total employment at newly-opened businesses: 5.1%
Total employment at newly-opened businesses: 436,751
Share of total businesses that are newly opened: 11.8%
Total newly-opened businesses: 60,511
For reference, here are the statistics for the entire United States:
Share of total employment at newly-opened businesses: 3.9%
Total employment at newly-opened businesses: 5,222,826
Share of total businesses that are newly opened: 9.3%
Total newly-opened businesses: 669,205
For more information, a detailed methodology, and complete results, you can find the original report on HireAHelper’s website: https://www.hireahelper.com/lifestyle/cities-with-the-most-jobs-created-by-new-businesses/
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