Sunday, December 6, 2009

New Firms Are No Job Engine

John Torinus, of the Journal Sentinel, assures us that new firms are the key to our recovery. Encouraging new firms using the typical incentives (job credits, small business loans, investment credits, grants, using pension fund money for speculative investment, etc.), he believes, will create jobs.

He also uses the education-as-magic-bullet talking-point to paint the image of a miraculous market machine, infused with newly educated college graduates, encouraged by credits and grants, creating new firms, thereby growing employment.

Yet, Torinus even points out that one-third of young companies fail to make it through a second year; what he calls a "messy churn." But lets ignore that fact, it would expose the false premise concocted in the article.

As Doug Henwood notes, "Small firms pay less than large ones, are less likely to offer health, pension, or child care benefits, and are often more dangerous to workers. With few exceptions, they're not all that innovative technologically...37% of the labor force changes its employment status every jobs do not sprout in the greatest numbers at either fresh start-ups or small firms...Smaller employers do generate plenty of jobs, but they also destroy them in great quantities. If you add together creation and destruction, no clear picture emerges."

The recovery hinges on the destruction of neoliberal policies and a reclamation of the public good.

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