A new business is born almost every minute in the United States, while an existing business fails every 80 seconds.
But that pattern is changing. For the first time in 30 years, business "deaths" in the U.S. exceeded business "births" and only 600,000 net new jobs were created in each quarter of 2012, according to a new report from the Brookings Institution titled "Declining Business Dynamism int he United States."
Robert Litan and his co-author Ian Hathaway studied two key measures of business dynamics: the creation of new businesses and job turnover in existing companies. What they found surprised them: "a long-term 30-year decline in both measures" nationally and in all but one of 366 metro major areas.
"This is really a problem that is geographically dispersed throughout the United States," says Litan in the video above.
But what about the anecdotal evidence that more people are starting their own businesses -- including young people just starting out and older baby boomers?
Litan doesn't doubt that "it's easier to get into business ... today than it ever has been before" as a result of cloud computing and the IT revolution. He says the popularity of shows like "Shark Tank" and "Silicon Valley" show a change in the "cultural zeitgeist." Yet despite these developments, "there's been a decline in entrepreneurial activity, and that's what been very puzzling," he notes.
So far the impact has been somewhat limited. "Productivity growth has been fairly decent, roughly around 2%," says Litan. "But in order to really get high growth in the future ... we're going to need a lot faster rate of new firm formation and more willingness by employers and individuals to move from areas or from jobs that are not growing to areas in the economy where jobs are growing."
The latest read on U.S. productivity seems to reinforce Litan's suggestion. Productivity in the first quarter fell 1.7% -- the weakest reading in a year -- though bad weather was a key reason.
Litan says the JOBS Act -- short for Jumpstart Our Business Startups Act -- which eases the rules for IPOs -- has been helpful and he's waiting for the SEC's new rules on crowdfunding.
In the meantime, he says Immigration reform is the easiest way to increase entrepreneurship in the U.S. He favors immigrants with high skills or foreign entrepreneurs.
"Immigrants are important because they are much more likely to start a business than Americans," says Litan. "This is true not only now but throughout history."
On Tuesday the White House announced plans to expand temporary work visas to the spouses of skilled immigrants already working in the country.
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