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Startups Create Many Jobs, but They Often Don't Last

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  • Maximiliano Dvorkin
  • Charles S. Gascon

Abstract

Despite the important role startups play in job growth, the importance of mature firms should not be understated. An important difference between young and old firms is the wage they pay. Older firms pay, on average, a much higher wage than younger firms. This is because a firm?s success is a function of productivity: Output per worker at surviving older firms is higher and, therefore, workers are paid a higher wage. Thus, while startups are very dynamic and have an important role in net job creation, in terms of total employment and earnings they tend to have a modest impact. Only the few firms that survive to the 11+ year age group have a lasting impact on employment.

Suggested Citation

  • Maximiliano Dvorkin & Charles S. Gascon, 2017. "Startups Create Many Jobs, but They Often Don't Last," The Regional Economist, Federal Reserve Bank of St. Louis, vol. 25(3).
  • Handle: RePEc:fip:fedlre:00159
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