Start-ups and high-growth businesses the driver for new jobs
The struggling jobs market is unlikely to pick up without a sustained recovery in the creation of new businesses and their confidence in hiring new workers, a small business expert says.
Small firms account for half of new employment, and they need more certainty and flexibility in hiring to take on staff with confidence, business consultant Christena Singh said.
“Sometimes it’s difficult to find the right person, and if it doesn’t work out we need to make sure it doesn’t affect them too negatively,” said Ms Singh, who until June compiled the Sensis Business Index – a small business confidence indicator. This echoes an emerging debate in the US about the decline in new firm creation and “dynamism”, which some academics claim is partly to blame for the slow recovery from the Great Recession.
Australia’s headline unemployment hit 6.4 per cent in July, its highest since 2002, and a far cry from the 4 per cent low of early 2008. Youth unemployment topped 20 per cent for the first time since the early 1990s.
The rise in unemployment mirrors a fall in the number of independent businesses with employees, from a peak of 840,000 in 2007 to 815,000 at July 2013, the last date for which official data is available. More recent data from Dun & Bradstreet suggests there was an uptick in the June quarter. Ms Singh said this was yet to be sustained across the economy.
Ms Singh said investment had migrated to the mining sector from the broader economy during the mining boom, but although the boom had peaked, investment had not yet moved back to non-mining businesses.
“Until there is investment back into that sector of the economy we probably won’t see the level of growth in new businesses or employment [that we need],” she said.
Ms Singh said small businesses needed to sift through a lot of information on government websites, and probably obtain outside advice, before they could be confident they weren’t breaching the Fair Work Act.
“It’s probably one of the hardest things to do and yet we want firms to hire,” she said. “By making it easier for businesses to employ people we should get more employment.”
She said the best thing the government could do to encourage small firms to hire would be to make employment rules and regulations easier to understand and more flexible, especially with penalty rates.
In the US, academics searching for clues to the slow, weak recovery of the nation’s jobs market have zeroed in on the declining rate of new firm creation.
A recent Brookings Institution paper, “The Other Ageing of America: the Increasing Dominance of Older Firms”, notes that start-ups in the US declined from 15 per cent of all firms in 1978 to 8 per cent in 2011. Economists from the University of Maryland and the US Census Bureau note that firms in business five years or less accounted for 39 per cent of all new jobs in the 1980s but just 33 per cent of all new jobs just before the Great Recession. “The rate of business start-ups in the US economy has been declining in recent decades, and business dynamism, as measured by the pace of job creation and job destruction, has declined as well.”
*Original Article by Ben Potter: http://www.brw.com.au/p/business/start_jobs_and_high_growth_businesses_iEUBj46b9peyJ4DDN4nHwO