Do IPOs create jobs?

1.9 million jobs lost to the slump in IPOs over the last decade, according to a new report

Has the collapse in the number of IPOs since the dot.com boom hurt employment? That's the question asked by a new report from the Kauffman foundation.

The argument is that IPOs pump huge amounts of money into start-ups, which can then be reinvested into employment growth. Their chart of the revenue per employee of Google, Amazon and eBay is instructive:

All three experienced sharp drops in revenue per employee immediately following their IPOs, as they went on hiring binges. If that's a standard pattern, then the fall in the number of IPOs a year (from hundreds in 1996-2000 to to just 8 at the nadir of the crash in 2008) will hit the labour market nationwide.

But it doesn't appear to be a standard pattern at all, as the key chart in the report shows:

While employment in the dot.com boom rocketed up post-IPO, once the crash hit, companies appear to have begun to take the cash injection and pocket it. Google – and Salesforce.com, the other big IPO of 2004 – are such exceptions that their year noticeably deviates from the trend.

As a result, the headline conclusion of the report is that around 1.9m jobs were forfeit over the past decade by the slump in IPOs. A lot, without doubt, but when you consider that post-IPO companies hired 1.6m people last year alone, the context becomes clear. And as the continuing saga of the Facebook IPO (currently stabilising around $29, 25 per cent lower than the IPO price) shows, there are upsides of steering clear of the whole thing.

Facebook in the heady days when it was above $30 a share. Photograph: Getty Images

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

Photo: Getty
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Who will win in Manchester Gorton?

Will Labour lose in Manchester Gorton?

The death of Gerald Kaufman will trigger a by-election in his Manchester Gorton seat, which has been Labour-held since 1935.

Coming so soon after the disappointing results in Copeland – where the seat was lost to the Tories – and Stoke – where the party lost vote share – some overly excitable commentators are talking up the possibility of an upset in the Manchester seat.

But Gorton is very different to Stoke-on-Trent and to Copeland. The Labour lead is 56 points, compared to 16.5 points in Stoke-on-Trent and 6.5 points in Copeland. (As I’ve written before and will doubtless write again, it’s much more instructive to talk about vote share rather than vote numbers in British elections. Most of the country tends to vote in the same way even if they vote at different volumes.)

That 47 per cent of the seat's residents come from a non-white background and that the Labour party holds every council seat in the constituency only adds to the party's strong position here. 

But that doesn’t mean that there is no interest to be had in the contest at all. That the seat voted heavily to remain in the European Union – around 65 per cent according to Chris Hanretty’s estimates – will provide a glimmer of hope to the Liberal Democrats that they can finish a strong second, as they did consistently from 1992 to 2010, before slumping to fifth in 2015.

How they do in second place will inform how jittery Labour MPs with smaller majorities and a history of Liberal Democrat activity are about Labour’s embrace of Brexit.

They also have a narrow chance of becoming competitive should Labour’s selection turn acrimonious. The seat has been in special measures since 2004, which means the selection will be run by the party’s national executive committee, though several local candidates are tipped to run, with Afzal Khan,  a local MEP, and Julie Reid, a local councillor, both expected to run for the vacant seats.

It’s highly unlikely but if the selection occurs in a way that irritates the local party or provokes serious local in-fighting, you can just about see how the Liberal Democrats give everyone a surprise. But it’s about as likely as the United States men landing on Mars any time soon – plausible, but far-fetched. 

Stephen Bush is special correspondent at the New Statesman. His daily briefing, Morning Call, provides a quick and essential guide to British politics.