By Todd McCracken and Dan Danner
December 11
In the past few months, there has been an influx of sentiment claiming that small businesses aren’t really that important to the U.S. economy and that politicians spend far too much time worrying about small business.
As the heads of the leading national small-business organizations in the United States, we will be the first to agree that politicians do seem to love talking about small business. But that’s just talk. What matters, and what these opinion pieces seem to forget, is that very little actually has been done to directly help small business recover from this recession. Our members continue to struggle with myriad issues.
This anti-small-business rhetoric rests on some false assumptions, namely that small businesses don’t really create that many jobs. Ask any local Washington area small-business owner and he or she will tell you that couldn’t be further from the truth. To dispel some of these myths, we’d like to share some facts about small business from those of us who understand it best.
Fact: Most people do work for a small business.
The Bureau of Labor Statistics compiles data that shows — without question — that firms with fewer than 500 workers employ about 55 percent of all private-sector workers. Looking to a smaller threshold of 250 employees, small firms still account for 48 percent of private-sector employment. When you consider that there are around 70 million people working for or running a small business, that’s huge.
Fact: Small businesses do fuel job growth.
According to data from BLS, from 1992 to 2007, firms with fewer than 500 employees created 64 percent of all net new jobs — this number accounts for small-business job losses as well as job gains and is truly the only accurate way to look at the overall picture. The Great Recession hit in late 2007, and the unemployment rate began to rise and remains stubbornly high to this day. Why? Small businesses are struggling to create jobs amid economic and political uncertainty. Small businesses are the key to job growth and giving them the tools they need to create jobs is paramount to economic recovery.
Fact: Regulations do impact small firms more than big business.
According to the U.S. Small Business Administration Office of Advocacy, small businesses pay a disproportionately high cost to comply with federal regulations — 36 percent higher than larger businesses.
Fact: Self-employed firms do, in fact, provide employment
In many criticisms of small business, there is a huge oversight: self-employed individuals. There are millions of self-employed firms that do not have employees and therefore do not count toward typical IRS payroll data. But make no mistake — these self-employed individuals are just that — “employed” and, by the way, pay the “payroll” taxes of both employer and employee.
Fact: Small businesses do drive the U.S. economy.
Small businesses create more than half of the nonfarm private gross domestic product, and make up 97.3 percent of all U.S. exporters.
The fact of the matter is that small firms face huge challenges every day but continue to start, run and grow. However, the more difficult we as a country make it for people to start a business, the less likely it is people will want to do it. We’re already seeing today the implications this holds in the form of lagging job growth.
That’s bad for business and bad for the U.S. economy.
McCracken is president and chief executive of the National Small Business Association and Danner is president and CEO of the National Federation of Independent Business. Other contributors were Kristie Arslan, president and CEO of the National Association for the Self-Employed; Karen Kerrigan, president and CEO of the Small Business and Entrepreneurship Council; John Satagaj, president and general counsel of the Small Business Legislative Council; and John Arensmeyer, founder and CEO of the Small Business Majority.