A new report has uncovered a disturbing trend: U.S. businesses are dying faster than new ones are being created, the Brookings Institution reports.
In fact, the creation rate for new firms has declined by nearly half since 1978.
This is worrying, researchers said, because business dynamism—the constant turnover as companies start, expand and contract or fail—is a key driver for new jobs and overall economic growth.
“Business churning and new firm formations have been on a persistent decline during the last few decades, and the pace of net job creation has been subdued,” the Brookings Institution found. “This decline has been documented across a broad range of sectors in the U.S. economy, even in high-tech.”
The study looked at whether certain parts of the country were affected more and found the trend was duplicated in every state and, with a few exceptions, practically all U.S. metropolitan areas.
The most recent data available is from 2011, so the researchers acknowledged the creation rate might have stabilized. They suggested that pro-growth policies, such as immigration rules that attract high-skill entrepreneurs and more support for accelerator programs, are needed.
