A new report is out this week showing that high-tech startups account more for new job growth than the rest of the private sector. The study, just put out by the Kauffman Foundation and the technology policy foundation Engine, shows that young tech-startups accelerate quickly in growth, adding thousands of jobs and even outpacing to make up for the loss of jobs from failing businesses. High-tech businesses are also outpacing regular business formation, with high-tech firm creation up 69% over the past 30 years and regular business creation down 9% over the same period.
One area where we’ve seen tremendous job growth in the past decade is in the so-called app economy, where by some estimates over 750,000 jobs have been created making apps and other digital goods for smartphones, tablets and other devices. The app economy is expected to double to $151 billion by 2017. A new bill is winding its way through Congress now that would help to grow the app economy by protecting it from any new taxes. Called the Internet Tax Freedom Forever Act, it would prevent Congress from imposing any new taxes on digital goods, as well as protect Internet access from any taxes or access fees.
Companies such as Facebook, Twitter and hundreds of other firms in Silicon Valley contribute to the economy as well, hiring high-skilled workers almost as fast as they can find them. In fact, they’re having great difficultly even meeting their needs and finding the right workers, which is why it’s so important for their industry to have Congress increase the level of H1-B visas, which allow high skilled workers into the US. These added high-skilled workers from outside the country add value to the companies, thus adding value to the American economy and to the consumer.
But it’s not just Silicon Valley that’s creating jobs, according to the study. Of the top 10 metro areas for high-tech startups, San Francisco comes in at #7, which Boulder, Ft. Collins, Denver and Seattle all coming in ahead. And just behind it are Washington, DC, and Colorado Springs (Colorado, it appears, is quite a hotbed of activity). This isn’t a trend affecting one area of the country—it’s something happening nationwide. State and local officials, not just Congress, would do well to pay attention to how they can create attractive economic climates for these high-tech startups.
One way Congress has helped pave the way for even more high-tech startups is through the Jobs Act, which allows startups to crowdfund their investment from low-dollar investors. This opens up a new market of investment for startups who may not be as well connected or polished as those making their pitches to venture capitalists in Silicon Valley. This democratization of the venture capital industry could lead to more wealth creation, more jobs, and ultimately, better products and services at low costs for the consumer.
Congress should do more to help these startups that have been the engine of our new high-tech economy. Most of the time, that means Congress should get out of the way and refrain from imposing new regulations and regulatory burdens, or get rid of regulations currently in place that make it harder for these companies to operate. If the US wants to continue to lead the world in high-tech growth, it needs to continue to find ways to encourage, and even accelerate, the burgeoning high-tech industry.
Zack Christenson writes on digital tech issues for The American Consumer Institute Center for Citizen Research.