Entrepreneurship

Business Startups Dwindle as Government Jobs Thrive

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simoneladybug / Foter

Rabi Molla at the Wall Street Journal notes, "Nearly 1 in 6 jobs in the U.S. are working for the government, more than any single private industry." The number actually peaked in 2009, then took a bit of a nosedive that caused panic—not in the streets, but in punditry hallways. But it's rising again, largely because of state and local government hiring. By contrast, at the beginning of the 20th century, "one out of 24 workers was on a government payroll," according to an economic paper published in 1949, with only 1 out of 15 taking goverment paychecks right after World War I.

So, blips aside, the state has been a growth industry.

The people taking government jobs certainly aren't matched by counterparts starting new businesses. The U.S. economy is increasingly dominated by older, established firms, according to a new Brookings Institution study.

Like the population, the business sector of the U.S. economy is aging. Our research shows a secular increase in the share of economic activity occurring in older firms—a trend that has occurred in every state and metropolitan area, in every firm size category, and in each broad industrial sector.

The share of firms aged 16 years or more was 23 percent in 1992, but leaped to 34 percent by 2011—an increase of 50 percent in two decades. The share of private-sector workers employed in these mature firms increased from 60 percent to 72 percent during the same period. Perhaps most startling, we find that employment and firm shares declined for every other firm age group during this period.

What's causing the ossification of American enterprise? Authors Ian Hathaway and Robert Litan say "a secular decline in entrepreneurship is playing a major role." What they refer to as "business dynamism" has been on the decline for three decades.

Hathaway and Litan don't have a clear explanation for the decine in entrepreneurship, though they note that business failure rates have been on the rise for younger firms, while flat for already established businesses. That suggests that starting and running a new firm has become more difficult than in the past.

Hathaway and Litan refer to this development as "especially disturbing" because of the innovative breakthroughs made by startups. They suggest we "find ways to encourage and make room for the startups of the future," but don't go into detail about what that means.

It's worth pointing out here that the United States has been sliding on both major international rankings of economic freedom. The Index of Economic Freedom puts the U.S. in 12th place, behind Estonia, and notes, "The U.S. is the only country to have recorded a loss of economic freedom each of the past seven years."

The Fraser Institute's Economic Freedom of the World: 2013 Annual Report (PDF) is even tougher, noting that the U.S. slid from third place to 19th place from 2000 to 2011. While there was widespread slippage, the biggest problem, noted the report, was with eroding government respect for legal systems and property rights.

Is declining economic freedom smothering the entrepreneurial spirit that once made the United States such a hotbed of innovation? That looks suspiciously likely. And we'll all suffer if, instead of creating new businesses, Americans flock to safe government sinecures instead—paid for by whoever remains in the sclerotic private sector.

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  1. Said it before, saying it again: we need another recession like 2008-2009. That was a godsend for paring back state and local government. Federal grew but it would have anyway and maybe more so without the shock.

  2. The share of firms aged 16 years or more was 23 percent in 1992, but leaped to 34 percent by 2011

    I’m surprised it’s that low.

  3. That suggests that starting and running a new firm has become more difficult than in the past.

    I wonder if it has anything to do with the thousands of new pages of regulations created every year on the local, state and federal level.

    1. And if your new firm deals with any sort of intellectual property you’re going to get slammed with lawsuits from patent trolls the moment you open for business.

    2. It is absolutely appalling the petty bureaucratic roadblocks, fees, delays, etc. that local governments put in front of any new business.

      Then, depending on what your business is, you may be subject to even more significant bureaucratic opposition at the state level, and again at the federal level.

      I’ve dealt with any number of people who wanted to start a business, and gave up at some point during their nth journey to city hall or some agency office to beg on bended knee for permission to do so.

      1. What’s really disgusting is the government assholes really believe they are making society better by preventing businesses from operating. After all, all businesses do is steal from workers and customers in their relentless pursuit of profits.

        1. “Welp, its been another good day here at Faceless Bureacracy. I killed two people’s dreams today.”

        2. In the minds of progressives, they ARE making society better. Because they are not engaged in the production of additional, unneeded, wasteful stuff that polutes beautiful mother earth, but instead are working towards distributing the fruits of the planet more equitably among those that need it.
          /sarc

      2. Entrepreneurship is a HUGE cornerstone to American economic success. We should do everything possible to let it develop. . .you know, instead of trying to kill it.

        And no small number of these barriers to entry are there to protect entrenched industries. There’s government again, stopping all that “corporate” power.

    3. This. My company was founded in the ’80s and it would be impossible to do the same thing now with the current barriers to entry.

    4. I wonder if it has anything to do with the thousands of new pages of regulations created every year on the local, state and federal level.

      Well, better that than have a bunch of new businesses that are allowed to murder, steal, destroy the environment, and DERPITY DERPTY DER. /Tony

  4. Just imagine, without doing any research, what it would take to open a bar, a factory, or an airline anywhere in the U.S. I’m guessing a large percentage of the initial investment and time would be spent getting permission slips from bureaucrats.

    That time and cost has to tip business model from “go” to “no-go” often. I’ll stick with my day job.

    1. Opening a bar would probably be the easiest of those. I’m guessing you’d be dealing more with local government, which seems much easier than calling the feds.

      1. “Sorry, but we’re not issuing any more liquor licenses at this time. There are enough bars and taverns in the area. Any new competition could hurt existing businesses. Have a nice day.”

        1. “If you like, we can call a public meeting of all the NIMBY neighbors so they can call you names and give us cover for telling you to piss off.”

        2. You must have visited New Jersey. The nice side effect is that I can bring my own adult beverages to the local restaurants.

          1. Or maybe he visited Chicago.

            http://www.suntimes.com/news/m…..incts.html

            1. Dry precincts?

              W
              T
              F

              1. The Jack Daniels Whiskey Distillery in Lynchburg Tennessee is in a DRY county. They can make it, but can’t sell it in that county. Until a few years ago, they couldn’t even sell/give samples if you took the tour of the distillery. There are many dry counties in the South.

          2. You can do that in many jurisdictions, at least with wine. The restaurant does have to have a liquor license, and is allowed to charge you a “corking fee”.

            1. Other way around here – no license and no fee. I suppose they could try to charge me, it would be the last time.

        3. Hey, that attitude creates business! Namely, a business that specializes in the buying and selling of existing liquor licenses.

          1. I know that the licenses do transfer to new owners of an establishment, but (at least in my state) there is a morality clause that let’s the ABC board veto you if you have a criminal record, etc.

            I don’t think the license transfers to different premises.

            I don’t know if you can openly sell a liquor license, and I suspect you can’t in most jurisdictions.

            There is apparently a cottage industry of being the “respectable” partner for LL purposes for strip clubs, etc.

            1. In CA, you can buy them and transfer them within the county.

          2. In New Jersey that is called the “mafia”.

      2. Ok, “easier” probably wasn’t the right word. But in theory, it would be simpler to cause a change in local government than federal government. I’m assuming that people have better access to their city councilman than to their state congressman, to their representative/senator, etc.

    2. I’m hoping tech will make the black and grey markets more accessible.

  5. Is declining economic freedom smothering the entrepreneurial spirit that once made the United States such a hotbed of innovation?

    Of course. The endgame of the regulatory leviathan is a bunch of cartelized industries dominated by massive companies who are nominally private but practically government-run. If there’s one thing TOP MEN loathe, it’s dynamism and unpredictability. “Too Big to Fail” is not only the result of government policy, it’s the goal of government policy.

    1. Multipliers from those government jobs will make more jobs in the private sector. And if industry is cartelized, that makes it easier for democracy to control it.

        1. That’s some pretty massive grade inflation right there. That one deserves a 0.

        1. Very damn funny indeed, and I can’t tell if it’s sarcasm or stupidity.

          1. It’s ‘Tony’ – he really is that stupid.

          2. Did you look up to see the author of the comment?

      1. Re: Tony,

        Multipliers from those government jobs will make more jobs in the private sector.

        If that were true, Cuba would be an investor’s paradise by now, considering ALL people there work for the government. Imagine all those multipliers, untapped!

        And if industry is cartelized, that makes it easier for democracy to control it.

        Tony unmasked! He’s really a Fascist.

        1. Was there ever much doubt?

        2. But Tony’s a Mussolini/Strasser type fascist- all urban-blue and with a big whiff of Marxism in the brew, so he’s a good one…

          At some point, I hope people figure out that both fascism and communism were both born out of the Romantic Movement of the mid-19th century. And Romanticism is “no way to run a railroad”. To my mind, romanticism and socialism go hand in hand, just as absurdism and anti-socialism should go hand in hand.

          1. In another forum, there was some obnoxious idiot making excuses for Marxism, so I pointed out that ultimately it’s a totalitarian collectivist system, just like fascism, and then asked why everybody knows totalitarian collectivism putatively from the right is self-evidently evil and anybody who makes excuses for it would be laughed out of polite society, while polite society knows you’re supposed to make excuses for totalitarian collectivism putatively from the left and anybody who questions this is the person laughed out of polite society.

            I only got a non-answer response.

        3. I don’t think you understand fascism. Only Republicans are fascists.

          1. You’re effort is lacking today

            1. *your

            2. Yeah I think this a fake Tony.

              1. Yeah I think someone hacked Tony’s account and they’re doing a parody of him. It’s kind of hard to tell, but this and he’s much closer to full retard than he normally gets. Either that or his mom let him play out in the sun too long. Someone call the cops on that bitch, quick!

      2. Hey guys, I just figured something out. I know how to solve unemployment: Let’s find all the unemployed, give them all shovels, and divide them into two groups.

        One group will dig a massive hole. The second group will try to fill in the hole.

        Boom! Everyone’s employed.

        1. Wouldn’t we need a third group to shovel the dirt over the second group?

          1. In Soviet Russia, we no cover mass graves with dirt. Better for citizens to learn cost of disobedience.

          2. The third group shoots the first group, at least that’s how the Germans and Russians worked it.

          3. We’ll only do that if the multiplier effect is TOO large and we need to select people for double employment.

        2. Re: JEP,

          Boom! Everyone’s employed.

          The multiplier effect will bring the private sector in to supply bottled water! Tony said so a few posts ago. And Elizabeth Warren will blather around about something someone didn’t build.

          1. I just hope we won’t be digging on top of her people’s sacred burial grounds…

      3. This has to be someone sockpuppeting the sockpuppet, right? This is too deliciously chock-full of be progisms to be for real.

        Best troll comment ever.

        1. Re: Sudden,

          Possibly, but still damned funny!

      4. Multipliers from those government jobs will make more jobs in the private sector.

        Where does the money for the government job come from shit for brains? You take money out of the private sector, put in the public sector, then gov employees put it back on the private sector. All you’ve done is moved the money from A to B to C and claimed magic multiplier powers. That’s assuming you didn’t lose anything in the transfer and disregarding opportunity cost of the people you stole the money from.

        And if industry is cartelized, that makes it easier for democracy to control it.

        So regulatory capture doesn’t exist? All this would do is lock in profits for those kkkorporashuns you claim to hate so much.

        1. No, really, I can raise the level of water in my swimming pool by taking water from one end and putting it in the other end.

          1. With a leaky bucket, no less!

        2. Many people suffer from a disability I call distinction-challenged. As a result they cannot comprehend simple things like the difference between money and wealth. So when governments create money out of thin air, these people believe that that money is wealth. Likewise when they see a wealthy person, they believe that that wealth can be magically converted into money to feed starving children. And this disability sadly has no cure.

          1. I have found that you can even explain that to people, and have them agree with you and apparently understand the concept, but then still go on about the evils of inequality and rich people not paying their share and all of that crap.
            Like you always say, people emote rather than think. But it is even worse when people actively choose to emote when they are perfectly capable of actually understanding things.

            1. I was listening to Jerry Doyle on the drive home this past summer and he articulated it quite well. He described it as the difference between reacting and responding. Reacting is an instant thing. The thought process is short circuited as the emotions take over. As opposed to responding which involves articulating thoughts. I find some otherwise intelligent people who can be perfectly capable of responding tend to react when it comes to economics and politics. My father is a great example. We simply cannot talk politics or economics unless I want him to not speak to me for a year.

      5. Multipliers can be less than 1, you know.

        1. Government takes money from productive people and pays government workers to divvy the money out to unproductive people. And somehow that makes the economy grow.

      6. Itz boomtimez, I tellz ya!

      7. Did you know that global warming isn’t real?

      8. Spoken like a true fasc — ok, fine, corporatist.

    2. The endgame of the regulatory leviathan is a bunch of cartelized industries dominated by massive companies who are nominally private but practically government-run.

      In a word, fascism.

      1. Welcome to America.

      2. I bet our uniforms won’t be as snazzy, though.

        1. They will be if Hugo Boss designs them.

        2. Yeah, ASUs sure ain’t no feldgrau.

    3. The endgame of the regulatory leviathan is a bunch of cartelized industries dominated by massive companies who are nominally private but practically government-run.

      So… Japan.

  6. The last time I went to a manufacturing software conference I noted that the average attendee was old – as in a few years away from retirement. I certainly didn’t see many youngsters in this field. Heck, at my job the main ERP software go-to guy is over seventy who is just working part time. It will be interesting to see how this all shakes out in the long run.

    Of course manufacturing isn’t exactly drawing the young generation in.

    1. I have to agree.

      I keep expecting to see a wave of millennials coming to take my lunch, but they just aren’t there.

      It’s like software hit its peak in Generation X and has now stopped there.

      1. For the most part, millennials who are very talented tend to get pushed into very specialized non-supervisory rolls because older managers refuse to retire.

      2. No, its just that manufacturing software isn’t cool and apps can’t do the heavy lifting. Now the apps can do front end great, but the real business management processes run on the big machines.

        I think this is a great opportunity to turn the screws on the employers who want the cheap young labor but have no choice but to pay for our (hard earned) experience.

  7. What’s causing the ossification of American enterprise?

    Could it be……SATAN?

    It’s worth pointing out here that the United States has been sliding on both major international rankings of economic freedom. The Index of Economic Freedom puts the U.S. in 12th place, behind Estonia, and notes, “The U.S. is the only country to have recorded a loss of economic freedom each of the past seven years.”

    So, yes.

    1. Sarbox.

  8. “The U.S. is the only country to have recorded a loss of economic freedom each of the past seven years.”

    Change you can believe in.

    1. So essentially since Team Blue took over the House.

      1. ???

        Dems took control of the House in ’06 and lost it in ’10, so the GOP has been in charge there nearly half of the entire period in question. Dems have controlled the Senate for the entire time and of course the Presidency for almost 6 of the 7+ years.

        The upshot is that this is on the heads of both the parties, blaming Democrats is pretty useless.

        1. They took all of Congress in the ’06 election – and Bush was too lame to bother vetoing much. From ’09 to ’11 they had all of Congress and the Presidency. Since then the Republicans have had the House and stopped the more egregious acts of stupidity.

          1. Oh, I think Obama has shown he is capable of any number of egregious acts of stupidity, no Congress required.

            1. no Congress required

              Sums up Obama quite nicely.

              1. Stupidity too big to be contained.

          2. The decline started in 2000, so I don’t see how bush is off the hook.

      2. Well one would think the optimism of the younger generation electing its candidate would result in entrepreneurship. After all, hope was on the rise.

        But we all knew that generation only voted for “free stuff from Uncle Sugar.” At this point, I’m fine if those shitbirds are all drafted into national service.

        1. So that generation is like all the other generations?

          1. Yes, only more so.

        2. At this point, I’m fine if those shitbirds are all drafted into national service.

          Hey! We’re people too, you know.

            1. We’re not inside a womb?

              1. But the umbilical cord is still attached.

                1. Your people ruined the country old man, we’re just finishing it off.

                  1. Just stay off my lawn while you’re doing it.

  9. “The course of history shows us that as a government grows, startups decrease.”

  10. While there was widespread slippage, the biggest problem, noted the report, was with eroding government respect for legal systems and property rights.

    Which is another way of saying that government has become more kleptomaniac.

  11. Stolen loot has to manifest somewhere doesn’t it? Look around the DC area and aside from the jobs themselves, you will see all the foodie, beer-snob, bullshit overpriced small cars, and weird entertainment establishments (indoor trampolines for adults…I’ve seen it) that could not exist but for the sheer concentration of stolen wealth coupled with the free time that comes with bullshit work (under the table of course). It’s a lot of fun for those who can survive in the empire’s capital. Didn’t Rome have all kinds of decadence in its rusting age?

    This it not to say that none of this stuff, aside from the bullshit government work, shouldn’t exist. I love me a good brew pub.

    1. I was thinking just that as I sat in a Saturday beltway traffic jam a few weeks ago among all the shitheads in European sedans and luxury SUVs. That is one prosperous parasitic city right now.

      1. Just remember, we’re a couple of weeks away from the bicentennial of the burning of Washington. A day to celebrate!

    2. See? MULTIPLIER!!

    3. There are trampoline parks everywhere. It’s a trend right now. There are half a dozen in Denver, at least. And indoor skydiving. It’s not so much the wealth that’s being concentrated in DC, although that is an issue as well, but it’s the power that’s the problem. The rest of the country can weather a parasite, but not a predator.

      1. Indoor skydiving is kind of lame. There is no weightless feeling of course, just a big fan keeping you afloat. Makes sense for practicing your form for real skydiving, but that’s it.

      2. Fair enough. I’m just old and hate fun, not unlike Ron Swanson, so I had yet to encounter them.

  12. Socialism is always a temporary fix. What capitalistic generation comes from Government hiring?

    1. Decent people working for the government for 18 months and seeing how fucked up rotten the entire system is?

      1. Decent people don’t tend to seek out government employment in the first place.

        1. Some do. Naivete is a common trait.

  13. Hathaway and Litan don’t have a clear explanation for the decine in entrepreneurship, though they note that business failure rates have been on the rise for younger firms, while flat for already established businesses.

    A combination of higher taxes, higher regulations and higher harassment from government. The bigger companies (who most likely lobbied for those regulations) can better weather the intrusions in the market compared to the younger competitors. And that, kiddies, is what Fascism is all about. Right, Tony?

    1. And multipliers. Can’t forget the multipliers.

    2. No, because Obama is not racist.

      1. I’m gonna go out on a limb here and say you can’t actually define fascism. Hint, its a lot more than racism. Also, you do realize racism is a component of all totalitarian governments, because they need a group to blame when they’re plan falls apart.

  14. Seems pretty obvious that a major reason is the growing regulatory and tax burden for businesses, especially if you want to have any employees.

    What gets me is that the “corporations are evil” crowd loves business regulation and mandates like Obamacare that make it harder and harder for smaller competition to get any traction. If you don’t like huge corporations, you need to loosen up business regulation and taxes.

    1. But we can’t do that because – evil corporations!

      It’s a moronic prog catch 22.

  15. The really sad thing is that, traditionally, weak labor markets have been paired with more startups. Now, though, we see weak labor markets paired with fewer startups.

    But the economy is booming! Right, Plugs? Because nothing says booming economy like shrinking private sector.

    1. Dude, economy is GDP, as in C + I + G + (X-M)! As long as G keeps growing, the economy booms!

    2. Just look at that GDP!! Ignore the fact that we cram government spending into it. Just look at it GOOOOOOO!!!

      1. Bah! Refresh before posting!

    3. Did the private sector shrink 8%?

      We’re not financial geniuses like PB.

  16. They suggest we “find ways to encourage and make room for the startups of the future,” but don’t go into detail about what that means.

    How about a new law passed by Congress? Something with a pithy name? How about the Startup Hiring Initiative Treaty? You know, SHIT!

    1. People in government just don’t understand that it’s not their job to create jobs. If they want more jobs in the economy, they need to get out of the fucking way and let businesses create jobs! We don’t need any new laws. Just start repealing laws that make it difficult to do business. That’s how to grow the economy. But it will never ever happen. Ever.

      1. People in government don’t tend to give a shit. About anything. They are counting time until the pension kicks in. There are few ambitious ones who want to build an empire and make the pension bigger, but most don’t want to put forth that much effort. And you can tell as much by their physical appearances. Walk into a government office building, it looks like downtown Green Bay. Wall to wall muumuus and 58-waist trousers.

        1. Lmao!

          Too funny

        2. When my job first took me into a federal building, I noticed how people would greet each other with these odd salutes. Later I learned that the salutes were actually them holding out the number of fingers they had until they got their pension. It was how the short timers rubbed it in.

      2. Actually they figured it out in China and India. It’s a bit laughable when people think that just one more regulation will lead to growth when we have two behemoths showing what really does lead to growth – getting the government out of the fucking way.

  17. Came across an old book at a thrift store titled “How to Form Your Own Corporation for $50”

    Talk about a relic!

    1. Meh. I still help people do it for $200. But there is a big leap from forming the corporation to actually putting it in operation. That’s where the permits and bureaucratic ego-stroking come in.

      1. I would seriously like to enlist your services, if you would feel comfortable doing it primarily via the internet. Do you accept PayPal or Bitcoin?

        1. What state?

            1. Never done NC. I can advise you, but I wouldn’t be comfortable charging for it or signing. Fortunately, I know it’s a pretty straightforward state (for a state). Not like New York or California, or the less-well-known administrative hellhole of New Mexico. The fees are steep-ish, but not usurious. http://www.sosnc.com/corporations/feebc.aspx

              Start here, and let me know if you have any questions. http://www.sosnc.com/corporations/

              My email’s visible now, and I can answer questions if you have them, but I’ve only done CO, WY, NM, AZ, KS, FL and Texas, so those are the only ones I’m competent to charge for.

  18. I have little doubt that regulations plus the massive amounts of crowding out going on have much to do with this. However, I have noticed for a few years that you have a lot of businesses, great and small, who swear up and down they want to hire people but there are no “qualified candidates”, because businesses have completely abandoned the notion of taking a smart but inexperienced person and training him. If your resume does not pass the Taleo filter, you’re fucked.

    1. Why would you take the chance on hiring someone you have to train when you can’t fire him without worrying about the NLRB putting you out of business?

      1. Also, it’s kinda hard for businesses to figure out who really is smart but inexperienced, because Griggs v. Duke Power outlawed aptitude tests. That’s why do many businesses rely on only hiring college graduates.

  19. Well once everyone with a job works for the government that will be the end of welfare. Perhaps the reintroduction of slavery?

    1. Soviet Union redux.

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