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Charts of the day: The start-up myth debunked (News Analysis)

By Richard Brenneman
Tuesday June 07, 2011 - 08:43:00 PM

Here in Berkeley, the zealously pro-business mayor and his city council majority have been using the claim that start-up businesses spawned by the University of California will save the local economy.

Their claim is used as a pretext to give developers a free hand, most recently in setting the stage for the destruction West Berkeley, the last part of the city where low-income artists and crafts workers have been able to hang on.

Mayor Tom Bates and his allies are bankrolled by the real estate development community, which provides the lion’s share of their campaign funds, as we documented during our days as a reporter for the Berkeley Daily Planet, and the Bates coalition has responded by opening up the city to their wrecking balls and construction cranes.

But a just-posted page full of charts from the Bureau of Labor Statistics shows that the startup bonanza was dying well before the onset of Bush/Obama crash. 

First this chart: 


Here’s the caption from the BLS: 

The number of jobs created by establishments less than 1 year old has decreased from 4.1 million in 1994, when this series began, to 2.5 million in 2010. (See chart 2.) This trend combined with that of fewer new establishments overall indicates that the number of new jobs in each new establishment is declining. 

And take a look at this one: 


The caption: 

The number of jobs created from establishment births peaked in the late 1990s and has experienced an overall decline since then. The decrease in birth-related employment during the latest recession is the largest in the history of the series, followed closely by the period of “jobless recovery” after the 2001 recession. 

As the two charts make clear, startups aren’t the job generators the mayor and his pals make them out to be. 

And one final chart shows that the only real sector of significant job growth has been in larger firms, despite all those promises that small jobs will be the savior of the American working class: 


The caption: 

Small businesses are typically the entry point for entrepreneurs as they develop ideas and build a customer base before deciding whether to expand. Of the nine size classes in the BED series, the six smallest (249 employees or smaller) have seen their shares of private sector employment decrease since the early 1990s, while the three largest size classes (250 or more employees) have seen their shares of total employment increase. 

So what’s really happening? The economy has been distorted so that only the big guys are winners, and it started well before the crash, under Clinton’s regime. 

Politicians like the Berkeley mayor and his cronies have used the myth to sell the public on projects that benefit the rich, while stealing existing jobs from the folks who need them most. 

Ah, politics. Ain’t it grand. 

And, as we’ve said before, if you want to understand the California version, give Chinatown another watch. 


Veteran journalist Richard Brenneman reported for the Planet on West Berkeley for many years. He now blogs regularly on a variety of topics. This piece first appeared on his blog, Eats, Shoots 'n Leaves, here