Growing resilient, self-renewing local economies:

How Hire One Can Help

Entrepreneurship: THE Key to Job Creation

Idaho Senate Local Government & Taxation Committee Norris Krueger, PhD

March 2011

Norris.krueger@gmail.com208.440.3747

@entrep_thinking

Are you surprised?Record levels of job NON-creation

In 2009, we hit a 29 Year LOW in job creation; we've got a loooong way to go unless we can light a fuse

Where do jobs come from?

• Net job creation =• Jobs Created minus Jobs Lost

• Which is more important? Aren't they equally important?

• It's job creation that drives the boat...• And “churn” is healthy• Shouldn't we ask WHO creates the jobs?• And shouldn't we help them?

58-40 or Fight?

Gross job creation – only three sources:• Businesses moving in• Businesses growing• Businesses starting

• They contribute 2%, 40% & 58% of gross job creation

Yes, in THAT order

• Startups create 58% of new jobs (gross)• Expanding firms create 40%• [In-migrant firms only 2% ]• BUT... what about NET job creation?• Startups – Business Exits = ~10% of net jobs• Growing firms – Shrinking firms = ~90%• Implication: Growing firms matter (so do

startups, especially with growth potential)– (shall we look at Idaho's numbers?)

Where Did Idaho's Jobs Come From? (2000-2007)

•   New businesses created around 297,000 jobs [58%]• Expanding businesses created around 200,000 jobs [40%]• Businesses moving in created around 10,000 jobs. [2%]

•   but now… let's look at the net job figures:• Businesses opening: created 296,983 jobs• Businesses closing: destroyed 291,824 jobs• Net jobs from business creation: +5,519 jobs [8%]

•   Business expansions: created 200,383 jobs• Business contractions: destroyed 133,502 jobs • Net jobs from business expansion: +64,781 jobs [92%]

•   Businesses moving into Idaho: created 10,555• Businesses moving out of Idaho: destroyed 10,757• Net jobs from business attraction: -202 jobs

• (1977-2005, the US created 450 million jobs & lost 406 million jobs)

Every economy needs a steady in-flow of job-creating businesses

Note the gap between the lines in 2009 vs 2001...and the plummet in job creation from 2005 onward

Opportunity Entrepreneurship declining since 2005

Necessity entrepreneurship at or near record levels

Starts and Terminations of Employer Businesses

400

450

500

550

600

650

700

1990

2000

2010

Thousands

Starts Terminations

Source: Office of Advocacy, SBA

Outlook for ExpansionPercent Next Three Months “Good Time to Expand” January

Quarter 1974 to January Quarter 2011

Again, a long way to go, why not a nudge?

Good Time to Expand2008/09 Recession Compared to Other Recent Recessions

0

5

10

15

20

25

30

Troug

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'+2 Qua

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'+4 Q

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'+6 Qua

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'+8 Q

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Quarters After Recession Trough

Per

cent

"Yes

" 2008-092001-011990-911981-821973-75

EMPLOYMENTPlanned Next Three Months and Current Job Openings

January 1986 to September 2010 (Seasonally Adjusted)

-10

0

10

20

30

40

86 88 90 92 94 96 98 00 02 04 06 08 10

Planned

Job Openings

YEAR

Perc

ent

So what can we do?

• Look for who is bucking the downtrend:– What are the successful cities & states doing?

• Look at proven practices• DO what successful states do• USE the proven practices• Integrate with our own positives

– How does Hire One fit in?– (How does Project 60 fit in??)

Focus on GROWTH firms (“gazelles”) - but see which is lowest on gazelles?

Three Keys to Growing Entrepreneurial Communities

• From the Global Entrepreneurship Monitor (GEM, over 10 years of study;~80 countries)

• #1 People believe they are personally prepared to be entrepreneurs – they SEE themselves as truly entrepreneurial.

• #2. Local social & cultural norms are seen as supportive

• #3. Ease of doing (& starting) business

Hire One

• Regardless of any direct $ impact, imagine the signal to growth-oriented entrepreneurs that Idaho supports them.

• (But the signal must be credible, of course)

• Hire One could also contribute to the #3 predictor of entrepreneurial activity (ease of doing business)

Project 60

• Includes “systemic”, “organic” growth as key component – a positive signal for #2 (social/cultural norms)

• The Governor's Summits focused extensively on #3 (ease of doing business)

• We still need strategy & tactics to promote the #1 predictor, the “entrepreneurial” component.... but we know how to do that (and it need not cost much at all)

Hire One as First Step?

• A limited tax credit rewarding Idaho entrepreneurs for growing will likely have positive impacts, especially psychologically

• Telling entrepreneurs we appreciate them cannot hurt unless...

• Entrepreneurs and citizens see it as a 'band-aid' or, worse, a token gesture

• So how does Idaho avoid that?• “Walk the walk”... create that strategy

Quick Overview: How to Grow a More Entrepreneurial Idaho

• Never miss the opportunity to be supportive– The “Bully Pulpit”

• Comprehensive strategy – broad AND deep– Broad: in every corner of the state, in every

industry – Deep: focus on where we are (or will) compete

the best

• Start with the Low Hanging Fruit (cheap, easy)– And... Isn't Hire One exactly that?

Examples of Low Hanging Fruit• Hire One inspires( us to look at more “tiles” to build our

entrepreneurial, job-creating “mosaic”!)

• Policy Briefings: Share with opinion leaders, civic officials, media & taxpayers how we really grow jobs

• Task Force: Marshal Idaho's own best & brightest to implement Idaho's killer comprehensive entrepreneurship strategy

• The Bully Pulpit: Preach the job creation 'gospel'! (and “walk the walk” with Hire One!)