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Can Entrepreneurs Fix The Job Loss Problem?

By on December 19, 2008 in Ideas


Small Business Trends:

Last month was a very bad month for jobs; the economy lost 533,000 jobs, the worst monthly decline since 1974.

People often talk about the importance of entrepreneurs as job creators in this country. So I got to thinking: how much additional entrepreneurial activity would have been necessary to avoid these job losses? The answer, it turns out, is a lot.

In an average month, new employer businesses create about 38 percent as many new jobs as we lost in November 2008. So, if we could figure out a way to have increased new employer businesses by 2.64 times their average monthly rate during November 2008, we could have offset the month’s job losses.

But, we would probably need additional entrepreneurial activity to do this. A variety of estimates from the Census Bureau and other places indicate that only about one-in-four new businesses is an employer business. So in an average month last year, 212,367 new businesses were created to generate the 201,478 new jobs. That means that to create enough jobs to replace the 533,000 jobs lost in November, we would have needed approximately 561,033 new business starts. That’s a lot of entrepreneurial effort.

But we’re not finished yet. To create this number of start-ups, we need many more people trying to become entrepreneurs. Only about one-in-three people who begin the process of starting a business actually create a business within seven years. So, we would have needed about 1.68 million people to have initiated the start-up process some time before November 2008 to have replaced the jobs lost during the month of November. That’s huge amount of entrepreneurial effort.

Photo by tatlici.

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Rich Whittle has added 6,226 posts to Business Opportunities Weblog.

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  • Jaclyn

    when you think about it…it does make a lot of sense that entrepreneurs create more jobs for the economy. all the jobs that are lost, and then all the new business’ opening up big or small and in between….have to be filled with someone…that’s where the recently or long unemployed people come in very handy.

  • cassy

    for me i hope it can help.but for us, to do that is we have to encourage more businessman to open new business for employment,so we can help those people who have lost their jobs. but the question is, can any businessman invest their money in this present global crisis? that is the big question that need to answer.

  • http://thesologuide.com Douglas Dolan

    I am interested to see how many more “entrepreneurs” the current market creates. With so many people either losing their jobs or in fear of being added to the list, I would be interested to see how many people decide to put their talents tow work for themselves and create a new part-time or full-time self-employment venture.

  • Jon

    From youth, most of us have been brainwashed with the notion of “go to school, get a good job and retire happily ever after”! The problem with this is with leave our destiny in the hands of outside factors… Our boss not firing us, the economy not going bad, etc. I wrote a blog that speaks about the pros and cons of working from home that I feel can benefit those who choose to read. You can find it here…
    http://www.empowernetwork.com/jcottle/blog/pros-and-cons-of-working-from-home/?id=jcottle

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