Startup company is the solution
According to a new economic research, almost all new job creation in the U.S. (94%) over the past three decades has come from technology start-up companies that are less than five year old. These new companies create an average of three million new jobs annually, while existing companies of any type or size are reducing an average of about one million jobs each year. As many established companies bankrupted, more new startup companies are emerging and capture the market.
All over the world, after a decade of economic recession, the number of new companies formation is increasing and change the global economy significantly in recent years. An economist wrote: “These new companies are the main engine of job creation, the solution to our economic recession, and the foundation for prosperity in this 21st century. The question is what can we do to increase the number of startups and solve the unemployment situation?”
According to the research, there are two things that caused “old” companies failed: Many are using obsoleted technologies, their business is inefficient, ineffective with high costs and low profits; their management is function badly in the competitive global market since they cannot change their mindset accordingly. The reason many new companies are successful because they are using technology to increase effectiveness and efficiency and having highly educated managers who understand global market as well as have good knowledge of technology. The research found that the major obstacle encountered by most startups is the shortage of skilled technology people to grow the industry. To solve this problem, government must issue policy requiring that Science, Technology, Engineering and Math (STEM) be given the highest priority in state education system and increase the number of STEM graduates to meet industry demand. (Many countries, including India and China already reducing funding for Non-STEM education in their state schools, and move their annual funding allocation to STEM fields). To promote growth in technology startups, government must reduce overregulation and tax burden to encourage more startups. Since these new startup companies are fragile, they need at least three to stabilize before they can create more jobs. Given their role as the key source of innovation and job creation, they need a comprehensive policy designed to cultivate and nurture them as they are an important aspect of the economy. Without that, the country may not be able to create enough jobs necessary to solve the unemployment problem.
The research concludes: “Every country must improve its education, especially in technology as it is the fuels of innovations. Every government must issue policies to promote startups and develop “special economic zones” with tax incentives for new startups and nurture them in the first few years of their establishment to grow the economy back to prosperity.”
Sources
- Blogs of Prof. John Vu, Carnegie Mellon University
