Startup businesses are creating fewer jobs, but why?

New businesses are starting smaller, surviving less often, and creating fewer jobs when they do, according to a new study by The Kauffman Foundation.

The analysis of Labor Department and U.S. Census data, titled Starting Smaller, Staying Smaller: America’s Slow Leak in Job Creation, shows that starting in the middle of last decade new businesses stopped creating jobs at the rates they did in previous decades. In the 80s new businesses created 3.5% all U.S. jobs and the number of total U.S. jobs grew by 2%. But in the 2000s, new businesses created only 2.6% of all U.S. jobs and the number of total U.S. jobs grew by only .9%.

The Starting Smaller study does not try to explain why new businesses are creating less jobs than they used to, but Kauffman put out a separate product this Tuesday designed to spur new business job creation.

The Start Up Act: A Proposal to Jumpstart the American Economy, identifies ten specific policy ideas Kauffman hopes can be packaged into legislation:

1. Entrepreneurs’ Visas: After an initial screening looking at past job creation or capital formation, foreign entrepreneurs would be granted a temporary visa. Once they have hired a minimum number of U.S. workers they would be granted a permanent green card.

2. Green Cards with Diplomas for STEM Degrees: Foreign students who earned degrees from U.S. universities in STEM (Science, Technology, Engineering, and Math) subjects would get permanent green cards.

3. Capital Gains Tax Exemptions for Long-Held Startup Investments: Keep the tax rate for capital gains tax rate at 15% for investments in early stage companies.

4. Tax Incentives for Startup Operating Capital: A 100% exclusion on corporate taxable income earned by qualified new businesses on the first year of taxable profit, followed by a 50 percent exclusion in the subsequent two years.

5. Facilitating Access to Public Capital Markets: Shareholders of firms worth less than $1 billion could choose not to subject the company to Sarbanes-Oxley’s burdensome compliance costs.

6. Differential Patent Fees to Reduce the Patent Backlog: Authorize the
U.S. Patent and Trademark Office to charge higher fees to patent applicants for expedited consideration, while providing a 50 percent discount for small business, individual inventor, and
nonprofit applicants.

7. Licensing Freedom for Academic Innovators: Mandate that all federal research grants to universities be conditioned on universities affording their faculty members the ability to choose their own licensing agents.

8. Automatic Ten-Year Sunsets for all Major Rules: All regulations with an estimated cost above $100 million would sunset automatically after ten years.

9 New Common-Sense Standards for Regulations: All regulations with an estimated cost above $100 million must under go a cost-benefit analysis and the most cost-effective regulatory option must be chosen.

10. Assessments of State/Local Startup and Business Policies: Require the Department of Commerce to produce an annual ranking of local governments based on favorable startup business environments.

Beltway ConfidentialjobsKauffman FoundationUS

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