Report: Business 'dynamism' decline bad for growth
A new report from the Brookings Institution said business “dynamism” — the process in which jobs are created, destroyed and turned over as businesses are continually born, fail, expand and contract — is declining in Maine, and that is a bad sign for growth and job creation.
Maine experts told the Portland Press Herald that while the report raise some valid points, the situation may not be that dire. The report, released earlier this month, said the rate at which businesses and jobs have been created and destroyed has declined in Maine and the United States over the past 25 years.
The number of Maine businesses started between 1978 and 2011 decreased by 50.3%, according to the report, a steeper decline than the national decrease at 42.1%. During the same period, the number of businesses folding decreased by 17.3% in Maine, while the country saw a smaller decrease at 3.1%. In addition, the rate at which jobs were created and eliminated decreased by 26.3% in Maine, while the national rate decreased by 21.8%.
The Brookings Institution report said “creative destruction” is important because “a dynamic economy constantly forces labor and capital to be put to better uses.”
Charles Colgan, an economist at the University of Southern Maine’s Muskie School of Public Service, told the Press Herald it’s impossible to determine how serious Maine’s decline in business dynamism is because U.S. Census data the report used does not include businesses that are sole proprietorships, which constitute a considerable part of the state’s economy.
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