Entrepreneurial companies create enormous job growth when compared to traditional companies, as outlined in new research from ERShares.
When comparing the new job growth created by stocks in the S&P 500 Index versus the new job growth of the companies in the Entrepreneurial 30 Index (a proprietary index that tracks 30 publicly traded, well-established entrepreneurial companies), it becomes clear that entrepreneurial companies are a major driving force in job creation.
From 2011-2019, the year-over-year new job growth for S&P 500 companies grew by slightly less than 50%, while job growth for companies in the ER30 Index grew by roughly 1000%.
It is important to note that this is based solely on organic growth, not growth created by mergers and acquisitions, as major acquisitions were excluded from the data sets.
Job Growth, by the Numbers
In 2019, 393,969 new jobs were created by companies in the S&P 500 Index. Of those, 171, 232 were created by entrepreneurial companies also listed in the ER30 Index.
In short, 43.46% of new job creation in 2019 was driven by entrepreneurial growth.
Furthermore, the share of jobs created by entrepreneurial companies is rising compared to other blue chip stocks. For example, in 2011, ER30 companies employed a total of 0.64% of the total jobs in the S&P 500 Index. As of 2019, the ER30 companies employed 3.66% of the total jobs.
Entrepreneurial Companies Driving Growth
Amazon (Nasdaq: AMZN) continues to be the largest employer of the S&P 500 Index, employing over 1,289,000 people per its fourth quarter earnings report (not including temporary personnel and contractors).
With year-over-year growth of 63%, it creates the most jobs of any company in the S&P 500.
Bezos’s vision and the entrepreneurial culture he has created at Amazon has allowed it to be an industry innovator and create disruptions in every area it has pursued. Amazon’s market cap is $1.64 trillion.
The ERShares Entrepreneurs ETF (ENTR), which tracks entrepreneurial stocks, holds 6.2% of its portfolio in Amazon.
Meanwhile, Alphabet Inc (Nasdaq: GOOGL), the parent company of Google, ranks second in job creation since 2011.
As of its last quarter earnings, the organization employed roughly 140,000 people, creating more than 16,000 jobs in the first quarter of 2021.
Google also offers the highest average salary within the technology sector.
ENTR holds 6.8% of its portfolio in Alphabet.
Increased Salaries Equates to Economic Growth
In a report by CNBC at the time of this data, five of the companies in the top 10 highest paying salaries were ER30 companies.
Meaning, not only are entrepreneurial companies driving growth, they are also doing it with a higher paid workforce, creating economic growth on several levels.
“Through innovation and dedication, entrepreneurs have succeeded time and again in creating wealth through their fast growth and providing employment opportunities while raising salaries at the same time, thus, benefiting the economy,” wrote the paper’s authors.
ERShares offers two ETFs that provide exposure to entrepreneurial companies. The ERShares Entrepreneurial Factor (EF) combines thematic research and AI to identify high-growth entrepreneurial companies.
The aforementioned ENTR ETF tracks mostly large cap U.S. companies, while the ERShares NextGen Entrepreneurs ETF (ERSX) tracks primarily small cap non-U.S. stocks.
For more news, information, and strategy, visit the Entrepreneur ETF Channel.
