While a slight improvement over last month's numbers, today's employment update from the Bureau of Labor Statistics presents a dismal picture for American workers. As policy makers search for the best remedies to strengthen our economic performance, they can't afford to overlook new firms and young firms.

Unfortunately, in troubled economic times the language of recovery is too often tilted toward large, established companies or to "small businesses," a broad term that traditionally applies to businesses with fewer than 500 employees. The conventional wisdom is that such businesses account for half of the labor force and are therefore the engine of future job creation.

That's not quite the case. The more precise factor is not the size of businesses, but rather their age. According to the Census Bureau, nearly all net job creation in the U.S. since 1980 occurred in firms less than five years old. A Kauffman Foundation report released yesterday shows that as recently as 2007, two-thirds of the jobs created were in such firms. Put more starkly, without new businesses, job creation in the American economy would have been negative for many years.

Kiva Systems illustrates the role young firms play in boosting employment. Founded in 2003, the Woburn, Mass.-based company seeks to solve supply-chain problems by using robots to organize, manage and move inventory. The company's not-so modest goal is to "[set] inventory free." Its revenue growth from 2005 through 2008 was an eye-popping 10,399%, and it currently employs 120 people.

Diapers.com, founded in 2004, offers free next-day shipping of diapers. Today the company has 89 employees, and last year it notched $89.4 million in revenue. And let's not forget online giant eBay, which during its first five years of existence, 1995-1999, hired an average of 128 new people per year.

There are countless new businesses sparking job creation throughout the U.S. economy. But countless other young companies never expand or even get off the ground because of regulatory and economic barriers.

Policy makers should be eliminating these barriers and creating incentives to foster the creation and growth of new businesses. Four measures to do so stand out:

• Welcome immigrants seeking scientific training at our universities. Researchers at Duke University and the University of California, Berkeley, found that between 1995 and 2005 immigrants founded or co-founded 25% of all U.S. high-tech firms and accounted for 24% of international patent applications from the U.S. in 2006.

One idea to boost innovation would be to grant permanent residency and work status (perhaps even automatic citizenship) to immigrants when they get their degrees in mathematics, engineering or the sciences from qualified universities.

If an automatic green card is not politically feasible, then let's expand and rename the current "entrepreneur's" visa, which is limited to immigrants who bring at least $1 million to this country. Let's drop the $1 million capital requirement and award a renewable "job creator's" visa to immigrants who have founded a company here and demonstrated they have at least one employee.

• Unleash America's academic entrepreneurs. Currently, a university professor with an idea may commercialize it only by using his university's technology licensing office. This is an inefficient, monopolistic arrangement. University inventors should be able to use the licensing office of any other university or licensing agents not affiliated with universities, as long as they honor their royalty-sharing agreements with their universities. This would lead to much more rapid commercialization of government-funded research at universities. This is especially important now, given the federal government's expansion of research monies for clean tech, life sciences and health-care information technologies, among others.

• Provide easier access to capital. The Obama administration has recently expanded some of the Small Business Administration's loan programs, raised the caps on others, and offered more aid to community banks. These are steps in the right direction. But in the longer run, we need a fundamental revision of bank capital standards, which do not vary with the economic cycle. In bad times like now, more flexible standards would allow prudent lending, when it is sorely needed by many firms to remain alive or meet demand when it begins to grow.

• Make it easier for companies seeking capital to go public. Compliance with the Sarbanes-Oxley Act of 2002, in particular, has proven to be far more expensive for smaller companies than originally intended or forecasted. Since shareholders are the intended beneficiaries of Sarbox, why not let them vote on whether their company needs to comply with some or all of its provisions—the expensive requirement for auditing of internal controls, in particular. We suspect that many shareholders would choose some form of opt-out, and in so doing, would enable more growing companies to continue growing as independent firms, rather than being bought out by larger companies that can intentionally or unintentionally rob the firms of the entrepreneurial magic that made them successful in the first place.

Entrepreneurs have a proven track record of job creation, especially in the early years of their firms. Eliminating or lowering the economic and regulatory hurdles that stand in the way of their success will pave the way for sustained expansion after the government's current stimulus measures come to their inevitable end.

Mr. Schramm is president of the Kauffman Foundation, where Mr. Litan is vice president of research and policy, and Mr. Stangler is senior research analyst.