January 27, 2016
Ever since the 2008 recession, the outlook for startups has been anything but promising. Statistics have surfaced about how 90 percent of startups fail, causing entrepreneurs to step back and re-evaluate their decisions. However, one new study in Wisconsin is showing that startups are finally making a comeback, driving job growth and aiding in the economy’s stabilization.
The Study Finds Startups Create More Jobs
The study, which was performed by Tessa Conroy and Steven Deller, economic researchers at the University of Wisconsin, showed that Wisconsin has experienced a massive growth in jobs, thanks largely to the newer, smaller businesses in the state. Findings show that businesses between zero and five years old account for 50 percent of job creation in Wisconsin. About half of those jobs come from businesses with less than a year under their belts.
In addition, approximately 62.3 percent of new startups make it through the first three years and 51.6 percent survive past the first five, which is much higher than the national average. This indicates that the jobs these startups provide are sustainable as well as plentiful.
Even though the study discovered enormous success in providing jobs and putting money back into Wisconsin’s economy, the state’s job growth still lags considerably behind the national average. The state is currently looking at a job growth of 7.6 percent, while the nation’s average is closer to 11.2 percent. This calls into question why job growth is so slow.
Examining the Slow Job Growth in Wisconsin
In the study, the authors wrote the following: “Given the importance of new startups to job creation, the relatively low ranking for Wisconsin helps us better understand why Wisconsin’s recovery from the Great Recession has been one of the slowest in the U.S.”
With further research, the authors of the study discovered that the largest reason behind this sluggish job growth is state policy currently favoring big businesses over small businesses. The government promotes more spending and fewer hoops for those in large businesses versus smaller counterparts, since in the past, startups have been considered risky ventures. Things are changing, however, as the study clearly shows.
“In Wisconsin, and across the nation, new business startups are key to job creation,” the researchers wrote. “Equally important is the survival rate of those new startups. The question is: Can Wisconsin craft policies that encourage new business startups and support them in the key first three to five years of operation?”
Changes to Be Made in Wisconsin
It’s not clear whether this study will have any impact on Wisconsin’s legislation when it comes to big businesses, but there’s no question that it’s a study worth looking into more. If the results of this study are repeated, it could call for some major policy changes within state governments.
“The bottom line to the analysis is that nearly all of the net new job growth comes from new business startups, most of which tend to be small,” said Deller. “This growing importance of ‘entrepreneurship’ is something that economists have known about for years, but policies still tend to favor larger established (older) businesses.”
Essentially, this study is calling for a return to the American dream. There was once a time when those with very little education and a dream could create a major empire in their niche. While we may never return to those idyllic times, this study is still a good sign for startups everywhere. It shows that the economy is finally beginning to support startups and small businesses, and perhaps governments should look into making that a part of their economic policies.
A Standard to the Nation
One of the most positive outcomes of this study is the example it sets for state governments across the nation. There’s often a pattern in politics of sticking with the status quo as long as possible, and until new research comes to light that can’t be ignored, government agencies will keep things how they are
This study provides evidence that the economy is finally on the up. Businesses are facing fewer shutdowns, easier lending power, and more spending from consumers. These Wisconsin findings may be just enough to convince governments everywhere that it’s time for some policy changes that will favor small businesses instead of leaving them out to dry.
I am a professional blogger, writer, researcher and successful investor who contributes to a number of reputable online media outlets and news sources. A graduate of Iowa State University, I’m now a full-time freelance writer, business consultant and independent real estate investor. Currently, I write for Inc.com, Entrepreneur.com, TheNextWeb.com and BiggerPockets.com. I have previously contributed to the HuffingtonPost.com, and Business.com, among others. In addition to journalism, technical writing and in-depth research, I’m also active in real estate investing and spend weekends volunteering with a local non-profit literacy organization. When I’m not saving the world with my keyboard, I can be found rock climbing.