New Firms Creating Jobs Faster, But Pay Less

Susan Hall

Young companies — those 2 years old or less — created jobs since 2008 at a faster pace than established companies, according to a new report from the Ewing Marion Kauffman Foundation.

The report isn’t specific to tech, though there have been plenty of tech startups since then. If found that 4 of every 10 hires at young companies were for newly created positions, compared to a ratio of between 0.25 and 0.33 at older firms.

And only startups show signs of recovery in churning, which it says is vital to improving the allocation of employees to jobs and for workers to earn more in their careers. Churning declined for companies of all ages between 1998 and 2010.

Said Dane Stangler, director of research and policy at the Kauffman Foundation:

If workers have fewer opportunities to change companies and job roles, as this research indicates, it will be harder for them to advance their careers and grow their earnings.

The research is based on the U.S. Census Bureau's Quarterly Workforce Indicators.

One possible reason for the churn is that younger companies pay less than more established — and likely larger — ones. It says all real earnings growth in the past decade has occurred at established firms. The slimmest gap between the two was in 2001, when employees at small businesses earned on average 78 percent of the salaries paid to workers at large companies. By 2011, that figure had dropped to 66 percent.

Over the same period, the gap has widened between the wages at startups and established companies, from 85 percent to 70 percent.

The widening gap raises concerns that startups can’t attract the top talent they need, according to a story from The Washington Post. But it points out that wages aren’t the only lure for startups. Generally the innovators, they can offer exciting work and a chance to make a real difference in the broad scheme of things — not to mention the possibility of a huge payout in the case of an IPO — if workers can handle the volatility and be the jack-of-all-trades that startups require.



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