Creating jobs
According to a new industry study, the next twenty five years will be the time of more rapid technological innovation than the last one. There will be significant advance in multiple fields such as Medicine, Information Technology, Biotechnology, Artificial Intelligence, Robotics, and Nanotechnology and many new innovations that people have not known yet. But scientific innovations alone do not mean economic growth without entrepreneurs to realize their commercial potential.
The study found that when it comes to create jobs, startup companies are the main factor because large companies with its multiple levels of management and bureaucracy often destroy jobs. The large size companies cannot change fast enough to promote job growth, especially when dealing with new technology. The study found that net job growth occurs in the U.S. economy can only happen through startups. Based on the Business Dynamics Statistics, a U.S. government dataset compiled by the U.S. Census Bureau that tracks the annual number of new businesses (startups) from 1977 to 2005, it found that between these seven years most large companies are job destroyers, losing 1 million jobs per year via laid-off, closing manufacturing plants, and outsource but at the same time startups add an average of 3 million new jobs per year. Therefore future job growth will be driven mostly by startups not established companies. The study also found that job growth at startups remains stable when large companies are volatile during recessionary years.
The study recommended that government should be thinking differently about its job growth policy. Government officers and policymakers tend to focus on existing companies by providing stimulus and incentives. It is the old thinking based on the industrial age where factories are established within the boundary of a country. With globalization, many jobs are outsourced to low cost countries so by providing stimulus and supports to large companies, the government is basically supporting another country's job growth. The study suggested that job creation would be best boosted by supporting startups. Because startups develop new technology, new market, new demand and they often grow fast which are drivers for job growth, as well as create more wealth for the economy. And it is not just the number of job that startups create but also the amount of salary it pays. On average, startups create nearly three million high paid jobs, these jobs also create another multiplier factors (One job create several additional jobs) while existing large companies only generate about 300,000 new jobs; many are labor and clerical positions which are not highly paid.
The study predicts that in the near future, immigrants will play significant roles in this economic growth due to their knowledge and skills that they learned in the U.S. The prediction is based on the fact that today 67% of college students in science, technology, engineering and math (STEM) are foreigners. It is not unreasonable to think that future entrepreneurs will mostly be these foreign students and they will be crucial to the U.S. economy. The challenge is NOT whether they are allowed to stay in the U.S but whether the U.S will have enough foreign students who are willing to stay with their technology skills to realize their “American dream.”
The study concluded that since current immigration law makes it difficult for these foreign students to stay and work in the U.S. it must be changed. Although the H1B (six-year special visas) to allow skilled workers to work in the U.S., many foreign students who earn STEM degrees in the U.S. are returning to their home countries. These are among the most highly skilled people and they are likely to establish startup businesses in their countries and employ their own people. To keep them in the U.S, the current law allows foreign entrepreneurs who start businesses in the U.S. to receive permanent residence status (EB5 Visa) but it requires them to invest $1 million in their company (or $500,000 if the business is started in a special area). Another bill called the “Startup Act 2.0”, received supports by both parties also proposes to issue 50,000 permanent residence (Green card) each year for foreign graduate school graduates from U.S. universities with STEM degrees and another additional 75,000 green cards for immigrants establishing startups here and who meet certain investment and hiring benchmarks. A congressman declared: “The more we allow skilled immigrants to come and work here, the better for our economy.”
Sources
- Blogs of Prof. John Vu, Carnegie Mellon University
