Skip to Content

Report Summary: The Case for Economic Dynamism – And Why It Matters for the American Worker


Economist Joseph Schumpeter referred to “economic dynamism” as “the perennial gale of creative destruction” that displaces established industries and products and introduces new ones. But recent technology-driven upheavals in the US economy have not delivered revitalization, write policy experts John Lettieri and Kenan Fikri in this astute report for investors, executives and entrepreneurs. However, the authors do see some glimmers of renewed vitality and opportunity for start-ups and workers in the post-COVID-19 economic recovery.


  • The United States saw a decades-long decline in economic dynamism.
  • Signs of economic revitalization are on the horizon.
  • Policy makers can enhance dynamism by focusing on three priorities.

Report Summary: The Case for Economic Dynamism - And Why It Matters for the American Worker


The United States saw a decades-long decline in “economic dynamism.”

At its core, economic dynamism describes how fast – in scale and scope – businesses, labor and industries transform, reinvent and adapt to changing environments. Since the early 2000s, unparalleled waves of technological revolutions have reshaped the nature of work and capital investment. But the American economy languished. The proof of this stagnation lay in weak business formation and labor mobility, in corporate consolidation, and in a significant reduction in the number of initial public offerings (IPOs).

“Dynamism helps ensure workers find opportunity in the midst of economic change.”

Across all sectors, the rate of start-ups dropped precipitously from 2006 to 2010, and then it flatlined through 2020. During the 2010s, new firms struggled to replace those closing. The percentage of employees working at start-ups also fell dramatically, to a low of approximately 2% of the labor force. The “job relocation rate” – a measure of workers moving into new opportunities arising from expansions and start-ups – dropped to a record low in 2019. These disturbing trends negatively affected productivity. Add to this the slowest US population growth since the 1930s, and it’s clear that economic dynamism has weakened immensely.

Signs of economic revitalization are on the horizon.

The COVID-19 pandemic sent an economic shock through the system, but the US labor market is now showing robust activity. In November 2021, labor market activity, as measured by “job quits,” hit an all-time high, with 3% of the workforce exiting positions. The IPO market also roared back to levels last since in the days of the dot-com bubble, and new business formation reached a record 1.8 million start-ups.

“Successful new start-ups generate much of the country’s long-term productivity growth with their innovations, which include new business models and new ways of employing people.”

Robust economic dynamism spurs employment growth; new companies have been the main drivers of net job expansion since 2000.

Policy makers can enhance dynamism by focusing on three priorities.

First, US lawmakers should remove the obstacles that entrepreneurs face in starting new businesses and that workers deal with when switching employers or careers. For example, officials should standardize and streamline professional licensing requirements. They should also ban noncompete clauses in employee contracts, which stifle people’s ability to seize opportunities at new firms.

“Better immigration policy is one of the most powerful tools available for boosting American dynamism.”

Second, leaders need to address immigration. The number of high-skilled immigrants has fallen from approximately one million entrants in 2016 to 250,000 in 2021. Newcomers, especially knowledge workers, can fill the demand for specialized talent and grow the working-age population. Third, government should remove the complex regulatory roadblocks to building the physical infrastructure necessary for economic dynamism, including housing stock and clean energy. The United States can recapture its economic vigor through progrowth policies that will unleash innovation, entrepreneurship and long-term economic expansion.

About the Authors

John W. Lettieri is cofounder, president and CEO of the bipartisan research and public policy think tank Economic Innovation Group (EIG), where Kenan Fikri is the director of research.

Alex Lim is a certified book reviewer and editor with over 10 years of experience in the publishing industry. He has reviewed hundreds of books for reputable magazines and websites, such as The New York Times, The Guardian, and Goodreads. Alex has a master’s degree in comparative literature from Harvard University and a PhD in literary criticism from Oxford University. He is also the author of several acclaimed books on literary theory and analysis, such as The Art of Reading and How to Write a Book Review. Alex lives in London, England with his wife and two children. You can contact him at [email protected] or follow him on Website | Twitter | Facebook

    Ads Blocker Image Powered by Code Help Pro

    Your Support Matters...

    We run an independent site that is committed to delivering valuable content, but it comes with its challenges. Many of our readers use ad blockers, causing our advertising revenue to decline. Unlike some websites, we have not implemented paywalls to restrict access. Your support can make a significant difference. If you find this website useful and choose to support us, it would greatly secure our future. We appreciate your help. If you are currently using an ad blocker, please consider disabling it for our site. Thank you for your understanding and support.