IDEAS home Printed from https://ideas.repec.org/p/zbw/iwqwdp/092018.html
   My bibliography  Save this paper

Do startups provide employment opportunities for disadvantaged workers?

Author

Listed:
  • Fackler, Daniel
  • Fuchs, Michaela
  • Hölscher, Lisa
  • Schnabel, Claus

Abstract

This paper analyzes whether startups offer job opportunities to workers potentially facing labor market problems. It compares the hiring patterns of startups and incumbents in the period 2003 to 2014 using administrative linked employer-employee data for Germany that allow to take the complete employment biographies of newly hired workers into account. The results indicate that young plants are more likely than incumbents to hire older and foreign applicants as well as workers who have instable employment biographies, come from unemployment or outside the labor force, or were affected by a plant closure. However, an analysis of entry wages reveals that disadvantageous worker characteristics come along with higher wage penalties in startups than in incumbents. Therefore, even if startups provide employment opportunities for certain groups of disadvantaged workers, the quality of these jobs in terms of initial remuneration seems to be low.

Suggested Citation

  • Fackler, Daniel & Fuchs, Michaela & Hölscher, Lisa & Schnabel, Claus, 2018. "Do startups provide employment opportunities for disadvantaged workers?," FAU Discussion Papers in Economics 09/2018, Friedrich-Alexander University Erlangen-Nuremberg, Institute for Economics.
  • Handle: RePEc:zbw:iwqwdp:092018
    as

    Download full text from publisher

    File URL: https://www.econstor.eu/bitstream/10419/179504/1/1024103579.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Paige Ouimet & Rebecca Zarutskie, 2011. "Who Works for Startups? The Relation between Firm Age, Employee Age, and Growth," Working Papers 11-31, Center for Economic Studies, U.S. Census Bureau.
    2. Andreas Koch & Jochen Späth & Harald Strotmann, 2013. "The role of employees for post-entry firm growth," Small Business Economics, Springer, vol. 41(3), pages 733-755, October.
    3. Schmucker, Alexandra & Seth, Stefan & Ludsteck, Johannes & Eberle, Johanna & Ganzer, Andreas, 2016. "Betriebs-Historik-Panel 1975-2014 (Establishment History Panel 1975-2014)," FDZ Datenreport. Documentation on Labour Market Data 201603_de, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    4. Andrea Weber & Christine Zulehner, 2014. "Competition And Gender Prejudice: Are Discriminatory Employers Doomed To Fail?," Journal of the European Economic Association, European Economic Association, vol. 12(2), pages 492-521, April.
    5. Michael Dahl & Toke Reichstein, 2007. "Are You Experienced? Prior Experience and the Survival of New Organizations," Industry and Innovation, Taylor & Francis Journals, vol. 14(5), pages 497-511.
    6. Alex Coad & Kristian Nielsen & Bram Timmermans, 2017. "My first employee: an empirical investigation," Small Business Economics, Springer, vol. 48(1), pages 25-45, January.
    7. Claudio Michelacci & Vincenzo Quadrini, 2005. "Borrowing from Employees: Wage Dynamics with Financial Constraints," Journal of the European Economic Association, MIT Press, vol. 3(2-3), pages 360-369, 04/05.
    8. Kaas Leo & Manger Christian, 2012. "Ethnic Discrimination in Germany’s Labour Market: A Field Experiment," German Economic Review, De Gruyter, vol. 13(1), pages 1-20, February.
    9. Fritsch, Michael & Weyh, Antje, 2004. "How large are the direct employment effects of new businesses? An empirical investigation," Freiberg Working Papers 2004/05, TU Bergakademie Freiberg, Faculty of Economics and Business Administration.
    10. Emin Dinlersoz & Henry Hyatt & Hubert Janicki, 2019. "Who Works for Whom? Worker Sorting in a Model of Entrepreneurship with Heterogeneous Labor Markets," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 34, pages 244-266, October.
    11. Emin Dinlersoz & Henry Hyatt & Hubert Janicki, 2019. "Who Works for Whom? Worker Sorting in a Model of Entrepreneurship with Heterogeneous Labor Markets," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 34, pages 244-266, October.
    12. Enrico Santarelli & Marco Vivarelli, 2007. "Entrepreneurship and the process of firms’ entry, survival and growth," Industrial and Corporate Change, Oxford University Press, vol. 16(3), pages 455-488, June.
    13. Kristina Nyström, 2012. "Labor mobility and entrepreneurship: who do new firms employ?," Chapters, in: Charlie Karlsson & Börje Johansson & Roger R. Stough (ed.), Entrepreneurship, Social Capital and Governance, chapter 5, pages 102-114, Edward Elgar Publishing.
    14. Andrea Weber & Christine Zulehner, 2010. "Female Hires and the Success of Start-Up Firms," American Economic Review, American Economic Association, vol. 100(2), pages 358-361, May.
    15. P. A. Geroski & José Mata & Pedro Portugal, 2010. "Founding conditions and the survival of new firms," Strategic Management Journal, Wiley Blackwell, vol. 31(5), pages 510-529, May.
    16. Robert W. Fairlie & Javier Miranda, 2017. "Taking the Leap: The Determinants of Entrepreneurs Hiring Their First Employee," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 26(1), pages 3-34, February.
    17. Michaela Fuchs & Antje Weyh, 2010. "The determinants of job creation and destruction: plant-level evidence for Eastern and Western Germany," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 37(4), pages 425-444, November.
    18. Rocha, Vera & van Praag, Mirjam C. & Folta, Timothy B. & Carneiro, Anabela, 2016. "Entrepreneurial Choices of Initial Human Capital Endowments and New Venture Success," IZA Discussion Papers 9919, Institute of Labor Economics (IZA).
    19. Udo Brixy & Susanne Kohaut & Claus Schnabel, 2007. "Do Newly Founded Firms Pay Lower Wages? First Evidence from Germany," Small Business Economics, Springer, vol. 29(1), pages 161-171, June.
    20. Schmucker, Alexandra & Seth, Stefan & Ludsteck, Johannes & Eberle, Johanna & Ganzer, Andreas, 2016. "Establishment History Panel 1975-2014," FDZ Datenreport. Documentation on Labour Market Data 201603_en, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    21. Jeffrey M Wooldridge, 2010. "Econometric Analysis of Cross Section and Panel Data," MIT Press Books, The MIT Press, edition 2, volume 1, number 0262232588, February.
    22. Antoni, Manfred & Ganzer, Andreas & Vom Berge, Philipp, 2016. "Sample of integrated labour market biographies (SIAB) 1975-2014," FDZ Datenreport. Documentation on Labour Market Data 201604_en, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    23. Daniel Fackler & Claus Schnabel & Joachim Wagner, 2013. "Establishment exits in Germany: the role of size and age," Small Business Economics, Springer, vol. 41(3), pages 683-700, October.
    24. Bernd Fitzenberger & Aderonke Osikominu & Robert Völter, 2006. "Imputation Rules to Improve the Education Variable in the IAB Employment Subsample," Schmollers Jahrbuch : Journal of Applied Social Science Studies / Zeitschrift für Wirtschafts- und Sozialwissenschaften, Duncker & Humblot, Berlin, vol. 126(3), pages 405-436.
    25. Michael S. Dahl & Steven Klepper, 2015. "Whom do new firms hire?," Industrial and Corporate Change, Oxford University Press, vol. 24(4), pages 819-836.
    26. John Haltiwanger & Ron S. Jarmin & Javier Miranda, 2013. "Who Creates Jobs? Small versus Large versus Young," The Review of Economics and Statistics, MIT Press, vol. 95(2), pages 347-361, May.
    27. Geroski, P. A., 1995. "What do we know about entry?," International Journal of Industrial Organization, Elsevier, vol. 13(4), pages 421-440, December.
    28. Kristina Nyström & Gulzat Elvung, 2014. "New firms and labor market entrants: Is there a wage penalty for employment in new firms?," Small Business Economics, Springer, vol. 43(2), pages 399-410, August.
    29. Michael Fritsch & Udo Brizy, 2004. "European Data Watch: The Establishment File of the German Social Insurance Statistcs," Schmollers Jahrbuch : Journal of Applied Social Science Studies / Zeitschrift für Wirtschafts- und Sozialwissenschaften, Duncker & Humblot, Berlin, vol. 124(1), pages 183-190.
    30. Tanja Hethey-Maier & Johannes F. Schmieder, 2013. "Does the Use of Worker Flows Improve the Analysis of Establishment Turnover? Evidence from German Administrative Data," Schmollers Jahrbuch : Journal of Applied Social Science Studies / Zeitschrift für Wirtschafts- und Sozialwissenschaften, Duncker & Humblot, Berlin, vol. 133(4), pages 477-510.
    31. Michael Fritsch & Antje Weyh, 2006. "How Large are the Direct Employment Effects of New Businesses? An Empirical Investigation for West Germany," Small Business Economics, Springer, vol. 27(2), pages 245-260, October.
    32. Charles Brown & James L. Medoff, 2003. "Firm Age and Wages," Journal of Labor Economics, University of Chicago Press, vol. 21(3), pages 677-698, July.
    33. Michael Fritsch & Florian Noseleit, 2013. "Investigating the anatomy of the employment effect of new business formation," Cambridge Journal of Economics, Oxford University Press, vol. 37(2), pages 349-377.
    34. Ouimet, Paige & Zarutskie, Rebecca, 2014. "Who works for startups? The relation between firm age, employee age, and growth," Journal of Financial Economics, Elsevier, vol. 112(3), pages 386-407.
    35. Audretsch, David B. & van Leeuwen, George & Menkveld, Bert & Thurik, Roy, 2001. "Market dynamics in the Netherlands: Competition policy and the role of small firms," International Journal of Industrial Organization, Elsevier, vol. 19(5), pages 795-821, April.
    36. Claus Schnabel & Susanne Kohaut & Udo Brixy, 2011. "Employment stability in newly founded firms: a matching approach using linked employer–employee data from Germany," Small Business Economics, Springer, vol. 36(1), pages 85-100, January.
    37. Scott Shane, 2009. "Why encouraging more people to become entrepreneurs is bad public policy," Small Business Economics, Springer, vol. 33(2), pages 141-149, August.
    38. Kristina Nyström & Gulzat Zhetibaeva Elvung, 2015. "New Firms as Employers: The Wage Penalty for Voluntary and Involuntary Job Switchers," LABOUR, CEIS, vol. 29(4), pages 348-366, December.
    39. Gartner, Hermann, 2005. "The imputation of wages above the contribution limit with the German IAB employment sample," FDZ Methodenreport 200502_en, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    40. Michael Roach & Henry Sauermann, 2015. "Founder or Joiner? The Role of Preferences and Context in Shaping Different Entrepreneurial Interests," Management Science, INFORMS, vol. 61(9), pages 2160-2184, September.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Fackler, Daniel & Hölscher, Lisa & Schnabel, Claus & Weyh, Antje, 2020. "Does Working at a Start-Up Pay Off?," IZA Discussion Papers 13033, Institute of Labor Economics (IZA).
    2. Bellmann, Lisa & Brixy, Udo, 2018. "Hiring by start-ups and regional labor supply," IAB Discussion Paper 201818, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Fackler, Daniel & Hölscher, Lisa & Schnabel, Claus & Weyh, Antje, 2020. "Does working at a start-up pay off?," Discussion Papers 112, Friedrich-Alexander University Erlangen-Nuremberg, Chair of Labour and Regional Economics.
    2. Dorner, Matthias & Fryges, Helmut & Schopen, Kathrin, 2017. "Wages in high-tech start-ups – Do academic spin-offs pay a wage premium?," Research Policy, Elsevier, vol. 46(1), pages 1-18.
    3. Brixy, Udo & Murmann, Martin, 2016. "The growth and human capital structure of new firms over the business cycle," IAB Discussion Paper 201642, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    4. Kristina Nyström, 2021. "Working for an entrepreneur: heaven or hell?," Small Business Economics, Springer, vol. 56(2), pages 919-931, February.
    5. Bellmann, Lisa & Brixy, Udo, 2018. "Hiring by start-ups and regional labor supply," IAB Discussion Paper 201818, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    6. Kristina Nyström & Gulzat Elvung, 2014. "New firms and labor market entrants: Is there a wage penalty for employment in new firms?," Small Business Economics, Springer, vol. 43(2), pages 399-410, August.
    7. Daniel Fackler & Claus Schnabel & Alexandra Schmucker, 2016. "Spinoffs in Germany: characteristics, survival, and the role of their parents," Small Business Economics, Springer, vol. 46(1), pages 93-114, January.
    8. Flavio Calvino & Chiara Criscuolo & Carlo Menon, 2018. "A cross-country analysis of start-up employment dynamics," Industrial and Corporate Change, Oxford University Press, vol. 27(4), pages 677-698.
    9. Kim, J. Daniel, 2018. "Is there a startup wage premium? Evidence from MIT graduates," Research Policy, Elsevier, vol. 47(3), pages 637-649.
    10. Tania Babina & Wenting Ma & Christian Moser & Paige Ouimet & Rebecca Zarutskie, 2019. "Pay, Employment, and Dynamics of Young Firms," Working Papers 19-23, Center for Economic Studies, U.S. Census Bureau.
    11. Fackler, Daniel, 2014. "Establishment survival in East and West Germany: A comparative analysis," Discussion Papers 90, Friedrich-Alexander University Erlangen-Nuremberg, Chair of Labour and Regional Economics.
    12. Pietro Santoleri, 2020. "Innovation and job creation in (high-growth) new firms [An international cohort comparison of size effects on job growth]," Industrial and Corporate Change, Oxford University Press, vol. 29(3), pages 731-756.
    13. Pawel Adrjan, 2018. "Risky Business? Earnings Prospects of Employees at Young Firms," Economics Series Working Papers 852, University of Oxford, Department of Economics.
    14. Daniel Fackler & Claus Schnabel & Joachim Wagner, 2013. "Establishment exits in Germany: the role of size and age," Small Business Economics, Springer, vol. 41(3), pages 683-700, October.
    15. Francesco Quatraro & Marco Vivarelli, 2015. "Drivers of Entrepreneurship and Post-entry Performance of Newborn Firms in Developing Countries," World Bank Research Observer, World Bank Group, vol. 30(2), pages 277-305.
    16. Kristina Nyström & Gulzat Zhetibaeva Elvung, 2015. "New Firms as Employers: The Wage Penalty for Voluntary and Involuntary Job Switchers," LABOUR, CEIS, vol. 29(4), pages 348-366, December.
    17. Andreas Koch & Jochen Späth & Harald Strotmann, 2013. "The role of employees for post-entry firm growth," Small Business Economics, Springer, vol. 41(3), pages 733-755, October.
    18. Brixy, Udo & Kohaut, Susanne & Schnabel, Claus, 2004. "How fast do newly founded firms mature? Empirical analyses on job quality in start-ups," Discussion Papers 30, Friedrich-Alexander University Erlangen-Nuremberg, Chair of Labour and Regional Economics.
    19. Brixy, Udo & Brunow, Stephan & D''Ambrosio, Anna, 2017. "Ethnic diversity in start-ups and its impact on innovation," IAB Discussion Paper 201725, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    20. Henry Sauermann, 2017. "Fire in the Belly? Employee Motives and Innovative Performance in Startups versus Established Firms," NBER Working Papers 23099, National Bureau of Economic Research, Inc.

    More about this item

    Keywords

    startups; young firms; employment; wages; linked employer-employee data;
    All these keywords.

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
    • M51 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Firm Employment Decisions; Promotions

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:zbw:iwqwdp:092018. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: . General contact details of provider: https://edirc.repec.org/data/vierlde.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ZBW - Leibniz Information Centre for Economics (email available below). General contact details of provider: https://edirc.repec.org/data/vierlde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.