Fact-Checking Small Business Jobs Numbers

Posted by: John Tozzi on November 8, 2011

There’s been a lot of healthy debate lately about whether small businesses or startups create jobs. I just saw this post at Entrepreneur that says:

Businesses with between $10,000 and $10 million of revenue account for just 17 percent of new jobs, according to a recent Treasury Department report.

The site doesn’t link to the report, but it appears to reference a tax paper Treasury released in August (PDF here).

Here’s the problem: The report doesn’t say anything about how many jobs small businesses create. It says that those small businesses account for 17 percent of total business income. (I checked with the Treasury Department and a spokeswoman confirmed the “17 percent of new jobs” figure did not come from Treasury.)

The Entrepreneur post, which has been shared hundreds of times on Twitter and LinkedIn, makes some good points about the hiring power of middle-market companies. It also links to an earlier piece from Reuters’ Felix Salmon, who in turn cites a New York Times op-ed and a column in The New Yorker.

But the Entrepreneur post misreports a crucial stat high up. Yes, it’s true that small businesses don’t create as many new jobs as politicians often say they do, and that growth is driven by a minority of startups that survive and get big. It’s also true that a lot hinges on what constitutes a “small” business. The Small Business Administration says 65 percent of net new jobs come from small firms (PDF), but those “small” firms are up to 500 employees. Many surely have more than $10 million in revenue, which is the cut-off that the Treasury tax paper used.

Jobs are an urgent issue right now, and we should be talking about where they come from and how to create more of them. Let’s just make sure the discussions are based on accurate information.

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What's it like to run your own company today? Entrepreneurs face multiple hurdles new and old, from raising capital and managing employees to keeping up with technology and competing in a global marketplace. In this blog, the Small Business channel's John Tozzi and Nick Leiber discuss the news, trends, and ideas that matter to small business owners. Follow them on Twitter @newentrepreneur.

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