We tend in public policy debates to think far too much about outcomes – success or failure, win or lose, fair or unfair.

By focusing solely on idealized results, such rigid, dualistic thinking puts citizens and policy makers into the position of being referees on the sidelines, judging the actions of others, rather than participating in the process of systemic improvement. Clearly we need rules and judges to have a civilized society, but the more time and people we devote to making and enforcing the rules, the fewer hours and people there are to enjoy the game. By focusing so much attention on the destination, we reduce the opportunity to experience the journey.

Nowhere is this either-or tendency more evident or more unproductive than in the labor market, especially its connections (or lack thereof) to our educational institutions. We define and divide the players clearly. You’re an employer or an employee or a student. You have a business or a job or a school to attend. Or you don’t. And if you do, you have to abide by the rules – wage, hours, credits, credentials, etc.

From this perspective, it is interesting to look at what actually happens in the labor market. Over the last five years, considering only private-sector employment, firms that have been in business less than two years accounted for only 2.5 percent of all jobs but 10.2 percent of all new hires. Firms that have been in existence for 11 or more years, in contrast, accounted for 83 percent of all private-sector employment but only 67 percent of new hires. And this pattern of newbies supporting newbies continues up the ladder. Firms aged 2 to 3 years, 4 to 5 years and 6 to 10 years all had higher percentages of new hires than the oldest category.

It is also true that younger firms have disproportionate shares of separations. They tend to hire and fire more people. That’s the nature of beginning the journey – lots of sturm und drang, lots of job churn. It is also true that for those new firms that do survive and move into the 2-to-3, 4-to-5 and 6-to-10 age brackets, the relative churn drops. In the youngest firms, new hires naturally make up the vast majority of total employees – over 60 percent in the average quarter of that first two years. But in the 2-to-3 year, 3-to-5 and 6-to-10 categories, the “new hire” share drops to 27 percent to 25 percent to 21 percent. And so do the “separation” shares.

My point here is that the economy is not best understood as a clearly defined “game” with rules and referees. It is much more usefully thought of as an evolving organism with a set of dynamic, experimental new enzymes and molecules recognizing new social needs and exploring ways to meet them, as well as more clearly defined large and stable systems seeking to fulfill more well-defined needs.

New businesses serve an important economic function not just in seeking to provide new goods and services, but also in bringing new workers into the economy even if they – the new businesses – “fail” in the sense of cease to exist after several years of exploring a new path. Indeed, such “failures” are an important indicator of a healthy economic system, and we ought to pay more attention to them and to the future paths of those who traveled with them for the first few years or quarters of their life journeys.

Charles Lawton is chief economist for Planning Decisions Inc. He can be contacted at:

clawton@planningdecisions.com