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September 1982, Vol. 105, No. 9
Tracking job growth
in private industry
The job generation process has been one of the most heavily debated public policy issues of recent years. Governments at the Federal, State, and local levels have invested heavily in programs designed to create jobsincluding urban and general economic development plans, tax credits and incentives, and public sector employment programsand to improve the ability of individuals to complete effectively in the labor market by providing basic education and training in new and expanding fields. Much current interest centers on the problem of matching unemployed workers from declining industries to opportunities in areas with expanding manpower needs, such as high technology and defense-related activities. An interesting legislative approach, the Small Business Research Innovation Act,1 is a proposal to set aside Federal research money for small business in order to spur technological innovation and create new jobs. The success of efforts to increase employment through economic policy hinges on the ability to understand the job creation process, identify the job creators, and develop policy initiatives that enhance their potential.
Aggregate data on employment levels and changes by industry and geographic area provide meaningful information on overall labor market trends, but are limited for the study of job creation in that they essentially portray net results. The employment changes reported monthly by the Bureau of Labor Statistics are the result of many thousands of production-function decisions made by individual employers, based on the relationship between their particular output and labor requirements. To understand the process of job creation, it is necessary to go beyond the aggregated data, and examine the multitude of business decisions at the establishment level.
This article summarizes the findings and methodology of some of the recent innovative labor market studies of this type in the private sector. Emphasis is placed on the microdata-based study of the job creation process under the direction of David Birch, director of the Massachusetts Institute of Technology (MIT) Program on Neighborhood and Regional Change.2 Similar studies by the Institute of Urban and Regional Development of the University of California at Berkeley, under the direction of Michael B. Teitz,3 and by the Brookings Institution4 will also be summarized. These efforts, with appropriate refinement and extension, have the potential to improve significantly the body of labor market information used to guide the development of economic policy in this country.
This excerpt is from an article published in the September 1982 issue of the Monthly Labor Review. The full text of the article is available in Adobe Acrobat's Portable Document Format (PDF). See How to view a PDF file for more information.
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1 This legislation was passed by Congress on July 12, 1982, and is awaiting Presidential signature. See, "A Battle over R&D Funding," The Washington Post, Feb. 18, 1982, p. A22
2 Various aspects of the MIT project are discussed in David Birch, The Job Generation Process, mimeo (MIT Program on Neighborhood and Regional Change, February 1979); Choosing a Place to Grow: Business Location Decisions in the 1970s, mimeo (January 1981); Corporate Evolution: A Micro-Based Analysis, mimeo (January 1981); and David Birch, "Who Creates Jobs," Public Interest, Fall 1981, pp. 3-14.
3 Michael B. Teitz, Small Business and Employment Growth in California, mimeo (Berkeley, Calif., Institute of Urban and Regional Development, University of California, March 1981).
4 Catherine Armington and Marjorie Odle, Sources of Employment Growth 1978-1980, mimeo (Washington, Business Microdata Project, The Brookings Institution, March 1981).
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