Too Many Accolades for Small Business
Small business gets more credit than it deserves for creating new jobs and stimulating economic growth during the recovery. Pro or con?
Pro: Mom and Pop Have Their Limits
To answer this question requires a deeper look into small business hiring and employment data to understand where new job growth truly comes from. There’s no question the majority of the U.S. workforce is employed by small businesses, but that doesn’t necessarily mean all small businesses create new jobs.
Your local dry cleaner, corner market, and hair salon provide services that are vital to the local economy and offer job opportunities for many in the community. However, mom-and-pop shops such as these typically are not fast-growth companies looking to hire new staff to accommodate for expansion.
Where you find innovation, particularly in the technology sector, is where you’ll find the real new-job creation engines. Our economy is driven by entrepreneurs who develop the next revolutionary mobile software applications and scientists who discover the next drugs to cure deadly diseases. Within industries where intellectual capital is a premium, you’ll find the high-growth startups driving new-job creation.
The devil is in the details, and once you look closer it’s easy to see why small, innovative startup companies contribute substantially to both gross and net job creation.
Con: Some Littles Are Bigger
Small businesses don’t get the credit they deserve for fueling our economy. Businesses with fewer than 500 workers make up 99.7 percent of all employer firms in the U.S., encompass more than half of all private-sector employees, and have generated 65 percent of net new jobs over the past 17 years, according to the Small Business Administration.
The U.S. has a global knowledge economy connected via technology, but the tech world has been given more than its fair share of credit for driving employment and has garnered more attention, energy, and possibly funding than warranted. “High tech” is after all, in the big scheme, a relatively new business.
Biotechnology, which claims media attention for growth, is not a large employer, with 95 percent of biotech firms employing fewer than 100 people.
The tech industry receives media accolades for innovation, and it is to be applauded for this. Outside capital infusion allows for hiring spikes and media attention, followed by additional capital, customers, and talent.
Meanwhile “real” small businesses such as modest-size restaurants, CPA firms, and in-home health providers keep pushing on as the true lifeblood of the economy, but they do so in relative obscurity because their story isn’t “sexy” as the media refers to such things. So yes, in reality, small businesses get far less credit than they deserve.