The Career Implications of Start‐up Work Experience
Abstract"Young and small firms account for a decreasing share of activity in the U.S. economy, giving rise to concerns about the impact this decline may have on innovation and productivity growth in the U.S. An area that has received little attention is the impact this decline may have on the career opportunities of workers employed at these firms. Underlying this concern is the premise that workers at these firms acquire skills they would not obtain otherwise and that these firms provide opportunities to nascent entrepreneurs that will serve them well at some future time. We contribute to this discussion by exploring the impact of working at a young firm on a worker’s career, particularly through earnings and the probability of starting a business. We consider two possibilities. First, jobs at young firms may be no different in this regard from jobs at large established firms. In this case, young firm employment impacts a worker’s future earnings primarily through total work experience, and workers should not be concerned about declining numbers of jobs at young firms as long as these jobs are being replaced by jobs at older firms. If, on the other hand, young small firms offer more opportunity to build or reveal worker aptitudes though multidimensional training, then earnings at subsequent jobs may be higher relative to workers who worked only at more established firms. In addition, workers at young firms with more entrepreneurial abilities may be more likely to become higher-earning entrepreneurs themselves later in life. If this is true, the consolidation of activity into older and larger businesses may generate a cycle of declining entrepreneurship and contribute to lower future
productivity for workers. We seek to identify the causal impact of the composition of old and young jobs on a worker’s subsequent earnings and employment choices using longitudinal Social Security earnings records for CPS respondents matched to longitudinal IRS-Census business
data. These data allow us to follow a large sample of individuals from age 15 to their early thirties, tracking their job choices and earnings as they age. We find that employment at young firms has a positive impact on a worker’s subsequent earnings, even after controlling for total work experience and person and job characteristics. We find evidence that young firm experience may differentially impact workers' propensities for business ownership and ownership earnings.. "