Establishment Age and Survival Frequently Asked Questions

The age data are based on the annual BED methodology which measures the over-the-year employment change from March of each year. Data are available from March 1994 through March 2009. The age of an establishment is determined by its date of first positive employment. Age categories are available for establishments less than a year old, one year old, two years, etc, and establishments “Born before March 1993”. Four standard BED tables (employment, establishments, levels, rates) are available by NAICS sector for the nation and at the total private level for the states and nation. (Tables 1-4) In addition, three new tables are available profiling the survival and longevity of business establishments. (Tables 5-7) Table 5 is a survival matrix which displays the number of establishments opening in a given year and how many of the original cohort survived into the next year, third year, fourth year, and so forth. Table 6 is the same survival matrix displaying the employment associated with each cohort. Finally, Table 7 profiles the establishment survival rates for each cohort by opening year.

  1. How does BLS measure the age of an establishment?
  2. Why are there age classes 1 year through 15 years and “Born before March 1993”?
  3. Why are rates for age “less than one year” always 200 percent?
  4. Why are there no data on expansions and contractions and closings for age “less than one year”?
  5. Why are net employment changes almost always positive for age “less than a year” and negative for the most ages older than one?
  6. Can I track how many of establishments started in a certain year are still in business 5 years or 10 years after?
  7. Are ages estimated at the establishment level or the firm level?
  8. How are the establishment age data different from the firm data?
  9. Why is the one-year net employment change for a given age class calculated from table 6 different from the net employment change calculated from table 1?
  10. Why are there establishment openings in older cohorts?

How does BLS measure the age of an establishment?

BLS uses the “date of first positive employment” (DFPE), the year and quarter in which a business reports positive employment for the first time, as the birth date. Establishments involved in breakouts or consolidations in multi-unit firms carry the DFPE from the predecessors. The age of an establishment is calculated from the difference between the current year and the birth year.

Why are there age classes 1 year through 15 years and “Born before March 1993”?

BED data are derived from the longitudinally linked QCEW which is available from the third quarter of 1992. The first March data available for age calculation is 1993; therefore the age of all establishments born prior to March 1993 are presented as one age group.

Why are rates for age “less than one year” always 200 percent?

In BED methodology, rates are calculated by dividing gross job gains and gross job losses and their components by the average of employment in the current and previous periods. Since previous period data for age “less than one year” are always zero the result is always 200 percent.

Why are there no data on expansions and contractions and closings for age “less than one year”?

Establishments in the age category “less than one year” are less than four quarters old in the March of the current year. Therefore, their employment in the previous year March is always zero. By definition, employment of this group comes under openings in annual BED estimates and there are no expansions, contractions and closings for this group.

Why are net employment changes almost always positive for age “less than a year” and negative for the most ages older than one?

The net employment change is the result of employment gains from establishment openings and expansions and employment losses from establishment closings and contractions. For the age class “less than one year” there is positive employment from openings and zero employment from closings and contractions. Under this methodology, by definition an establishment cannot close in the “less than a year” categories. The closings from this age cohort will occur in the following year. However, for the older age classes, the net employment change is the sum of employment gains from expansions and a limited number of re-openings minus the sum of employment losses from contractions and a large number of closings. The size of the older age cohorts gradually shrinks by the number of establishment closings.

Can I track how many of establishments started in a certain year are still in business 5 years or 10 years after?

Yes, Table 5 shows this information. Table 6 shows the employment of the surviving establishments.

Are ages estimated at the establishment level or the firm level?

Age and survival data are measured at the establishment level.

How are the establishment age data different from the firm data?

If a firm operates in one location, the age data would be the same at both the firm and establishment level. However, if a chain store opens a new branch, it would be a new opening under the establishment methodology while it would be an expansion under the firm methodology.

Why is the one-year net employment change for a given age class calculated from table 6 different from the net employment change calculated from table 1?

Data in Table 1 are derived from a dynamic tabulation of job and establishment flows, while data in Table 6 are derived from cross sectional snapshots for March of each year. Therefore, the net employment change in Table 1 for a given age class will not necessarily equal the derived net change found in Tables 6 for the same age class. The difference results from the treatment of establishment breakouts and consolidations that occur during the restructuring and/or reorganization within multi-establishment firms over the year. However, the net employment changes for the total are the same in both tables.

Why are there establishment openings in older cohorts?

Openings are establishments with positive employment in the current year and no employment in the march of the previous year. Re-openings can occur in older cohorts when an existing establishment, due to the remodeling, renovation, or refurbishing activity, reports no employment during the March of the previous year. When this establishment resumes operation and reports positive employment in the current year, it appears as a re-opening in the older age group. Or, an establishment simply may not have any economic activity in the previous year due to the production schedule of the business. An example would be a construction company that digs pipelines. Once a project is complete, the establishment may experience a lull in economic activity with no employees until a new project is started.

 

Last Modified Date: August 25, 2010