As a community, we celebrate when an existing large enterprise moves to our area, bringing the promise of several hundred jobs. And well we should. But Kansas City’s entrepreneurs, working outside the spotlight, are a job-creating powerhouse, bringing an average of 16,376 new jobs to Kansas City every single year.
Our team at KCSourceLink, a program of the University of Missouri-Kansas City Innovation Center, has developed a statistical analysis that sheds unprecedented light on the importance of Kansas City startups by providing precise statistics on job creation. It reveals that entrepreneurial venture creation is an extremely powerful economic development engine.
First-time businesses that employed fewer than 20 workers created 16,325 jobs in 2016. Looking at cumulative job creation year to year, the jobs generated by startups launched between 2012 and 2016 added up to 84,011 jobs by 2016. This accounts for 65 percent of jobs added, and 7.7 percent of all jobs, in Kansas City in 2016. (For this report, the Kansas City region includes Johnson, Leavenworth, Miami and Wyandotte counties in Kansas; and Cass, Clay, Jackson, Platte and Ray counties in Missouri.)
How do we know this to be true? Analysis of statistics on new firms registering employees for unemployment insurance for the first time — a registration required by law — provides a precise and reliable count of job creation. By tracking the growth of those insurance registrations by these newer firms over time — and subtracting the jobs lost by firms that shrink or fail — we can pinpoint the net job creation generated by new enterprises.
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The new analytical tool that KCSourceLink has developed also tracks salaries. It shows that average salaries paid by first-time employers trail the overall metro average for the first three years but exceed the overall average after Year 3 and widen the gap considerably in succeeding years. The average annual wage in the metro area is about $43,000. The average wage for startups is around $40,000 in Year 1, increases to $46,000 by Year 5 and to almost $52,000 for a firm’s seventh year in business.
The takeaway from this statistic is clear: By investing economic resources in entrepreneurship, cities, states and regional agencies can generate substantial impact on growth. Support for business creation can take many forms. Some examples:
▪ Be prepared to make a referral: KCSourceLink is an easy first step to access Kansas City’s 250-plus resource organizations.
▪ Donate to an entrepreneurial support organization.
▪ Improve someone’s social network; introduce them to a customer, investor or mentor.
▪ Attend a meetup; sponsor it; convene it.
▪ Buy from locally owned companies.
▪ Invest in local startups.
▪ Support the educational system to develop the talent of tomorrow.
▪ Help create a community that’s attractive and vibrant
Six years ago, the Greater Kansas City Chamber of Commerce announced the Big 5: the top civic priorities for our community. One of those five is to make our community “America’s Most Entrepreneurial City.” Back then, we knew that entrepreneurship was a big deal. We knew that KC’s entrepreneurs shaped our city’s character and culture. We knew entrepreneurs brought energy and fresh talent to our city. We knew their ideas, inventions and startups put KC on the map and in the news and helped make our city an attractive and vibrant place to live and work.
Now, we know with confidence and precision just how big a deal entrepreneurship is. Can anyone now doubt the value of pursuing this Big 5 goal with all the tools at our disposal?
Wednesday, KCSourceLink released We Create Jobs, a report based on the new, proprietary analytical tool that we have developed. We invite everyone interested in job creation and economic development to view the full, detailed report at www.wecreatekc.com.
Maria Meyers is executive director of the UMKC Innovation Center and founder of KCSourceLink.