Where will all the jobs come from?

Posted by on May 10, 2010 in entrepreneur, Jobs

Despite the fact both Canada and the United States have posted job gains, many of the jobs are part-time positions and the unemployment rate among younger workers (15-25 years old) continues to be quite high (over 15% in Canada), causing a larger structural problem since it is this group of workers who need to fund the various benefits of an aging population.

…and here is the depressing Monday morning statistic: if the United States created 250,000 jobs a month (it created 290,000 in April), it would take 7.5 years for the country to recover all the jobs it lost before this rescission.

Where are all these jobs going to come from?

It is not, contrary to popular opinion, going to be from large and mature companies. Meeting quarterly earnings expectations of shareholders (for those companies which are public) means that expanding head-count is not in the cards. Instead, think small, entrepreneurial and immigrant based businesses as the source of your new job.

The United States Census Bureau statistics from 1980-2005 found that job creation came almost entirely from firms from 0-5 years old; without these young firms, job creation in the U.S. would  be negative in most years. In other words, the captains of industry have not been net positive job creators for more than 25 years.  New firms average 4 positions per year in the time-line studied. In 2007, 8 of the 12 million jobs created came from young businesses of 0-5 years.

In 2008, 320 of 100,000 adults opened a new business a month or a rate of 0.32% of the adult population. This is over historical norms of 0.28 %. However, among the immigrant population in the U.S., the entrepreneurial activity rate was 0.51% in 2008, again, above the historical rate in the 0.40′s. The gap between immigrant and non-immigrant entrepreneurial activity is also a historical pattern.

Quite simply, immigrants are more likely to open a business. Since young businesses are the greatest source of job creation, it stands to reason that immigrant owned young businesses are more likely to hire than non-immigrant mature businesses.

Job seekers may well rethink their job seeking options to smaller and younger firms rather than larger and mature firms. Working for smaller and younger means being able to contribute many different skills rather than mastering one small skill and thinking more like a business owner than a traditional employee (since equity is often given in compensation in lieu of benefits).

While the age of the fully-benefited job may be over, its possible replacement towards employees who work in and are asked to contribute to independent, innovative and wealth creating firms may not be such a bad thing for an economy set on consumption for the last 10 years.

(the above stats were from the U.S. Census Bureau and The Kauffman Foundation. Errors are my own)

3 Comments on Where will all the jobs come from?

By canada.creditcards.com on May 11, 2010 at 3:32 pm

I think a lot of job-seekers automatically look towards bigger companies for employment simply because they are trying to find a more “reliable” and “stable” company. Considering a smaller, newer company is often a smarter move because they usually have a more streamline budget with more leeway for bending to accommodate the volatile market situations. Your application for employment is probably has more of a chance of getting seen by a smaller firm than a huge conglomerate. – Rudy

By Jamie on May 15, 2010 at 1:07 pm

My division of a national company is due to lose over 30% of the workforce due to retirement in the next five years. Our tech department is due to lose 70% in the same time frame. I wonder how many companies are in this particular boat?

By canadiancard on November 18, 2011 at 3:28 pm

I believe that at least a portion of new jobs needed will come from the skill trade sector. When the aging baby boomer generation start to retire it will create a huge demand for skill trade workers. Not sure about the US but in Canada it’s already started. Companies are paying big money for qualified welders, millwrights, plumbers, electricians and miners.

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