New Businesses in Wisconsin Creates an Average of 86,000 Jobs Per Year

If a primary goal of economic growth policy is the creation of jobs and employment opportunities for Wisconsin residents, should policymakers and practitioners focus their limited resources on the formation of new businesses or the expansion of existing businesses? To gain insights into this question it is important to understand whether job growth comes predominantly from new or existing businesses. Let’s explore the Census Bureau Business Dynamic Statics for Wisconsin metropolitan and nonmetropolitan annually from 1978 to 2020.

A key dimension to this analysis is the realization that existing businesses can both add and subtract jobs, and it is the net difference that needs to be examined. Existing businesses can grow and add jobs, they can remain constant or contract or even close, resulting in job loss. Over the period examined, new business formation created an annual average of 86,321 jobs, but existing businesses shed or lost 59,945 for an average annual job gain of 26,376. Thus, for any given year between 1978 and 2020 new business formation drove job growth in Wisconsin. This is true not only for the state as a whole but also for metropolitan and nonmetropolitan Wisconsin (Figures 1 and 2).

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