• Wed. Nov 29th, 2023

St. Louis Federal Reserve economist reveals the truth about startups and job creation


Nov 21, 2023

Charles Gascon, an economist at the St. Louis Federal Reserve, stated that while business startups are known to create many jobs, they often do not last. According to Gascon, a majority of the jobs created from 2020 to 2021 are from startups or new companies. However, the net job creation for startups is small and sometimes negative due to the high likelihood that they close down within five years, often due to low pay.

Despite popular belief, Gascon noted that many people assume most of these startups are tech companies. In reality, tech startups make up a small segment. A large portion of startups are actually restaurants, small businesses, and professional service firms like law or accounting firms. The composition of startups mirrors the broader industry composition of the United States, with exceptions in industries with high barriers to entry, such as manufacturing or utilities production.

In addition to startups, businesses that have been around for at least 11 years also contributed to the growing economy during the COVID-19 pandemic years. While there was positive net job creation from these businesses, it did not show up the same way because many large firms laid off workers due to the pandemic and then started ramping up.

According to the Federal Reserve Bank of St. Louis, startups account for about 2% of the total employment in the U.S. economy. Overall, while startups create a significant number of jobs

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