Are tiny businesses the real job creators?

A new study says the smallest US companies are some of the biggest employment drivers.

By Kim Peterson Aug 23, 2013 9:57AM
Young Woman Florist Small Business Flower Shop Owner, Checkout Counter © YinYang, the Agency Collection, Getty ImagesForget about the large employers that froze or pulled back on hiring in the last decade. The real job creators in this country are the so-called "microbusinesses" with fewer than five employees.

That's according to a new study by -- surprise -- the California Association for Micro Enterprise Opportunity. But the numbers do seem to be legitimate.

Microbusinesses with one to four employees created a net 5.5 million jobs from 2004 to 2010, according to the study. Large companies with more than 500 workers lost 1.8 million jobs over the same period. The study used data from the U.S. Department of Commerce and the U.S. Census Bureau.

In the especially painful years of 2009 and 2010, microbusinesses were the only category to create jobs. All others cut employment during that time.

And microbusinesses were net job creators in 50 states from 2004 to 2010, while companies with five to nine employees were net job creators in 41 states. The largest companies, those with more than 500 employees, were net job creators in 17 states.

A separate report out recently clarifies the issue a bit more, saying that overall job creation has been negative over the last two decades except for one area: new firms less than a year old. That's mostly because new companies are only adding jobs, so their net job creation rate is typically at 100%.

About half of all companies fail within the first five years, but the ones that do survive that rocky period generally do well and have robust hiring. The report was by Ian Hathaway, an economic adviser to a lobbying group for tech startups.

The studies point to a fact that was very apparent in the recent recession. Americans are generally a resourceful bunch, eager to start their own businesses when other jobs are scarce. But there's a huge divide between starting up a business and getting enough revenue to sustain that operation, and all the optimism in the world won't help when the money isn't coming in.

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33Comments
Aug 23, 2013 5:17PM
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As a small business owner myself, this is not news to me. Small business faces headwind in the form of regulation, taxes that are proportionally larger than the burden faced by big business. These taxes and regulation serve as barrier to entry whether that is the intent or not. Imagine if our government was more business friendly, more of these micro business would grow to big business, and that would be employee friendly. The more business, the more opportunity.
Aug 24, 2013 1:25AM
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Last week I asked my insurance company about expanding my agriculture business to possibly include a part time employee. I have a farm policy, already in place. After, listening to all the added expenses I realized that I can afford to pay the employee, but unfortunately I would have to get a part time job myself to cover the added cost of getting workman's compensation, additional liability insurance, additional book keeping and regulatory compliance, ect.... It really doesn't make sense to pay out so much first, and then try to recoup it or at least try and break even with the small additional income I would make by the additional employee. The only one that is guaranteed to profit is my fat cat insurance broker. He drives a beautiful new BMW and I drive a ten year old American truck.

What a sad small business model !!  Yikes,  this is ridiculous...is this the way of our future??

 

Aug 23, 2013 1:29PM
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They are the true job creators but as the larger corporations have the tax code in their favor and also dictate better prices from suppliers the small businesses continue to be outmatched and in many cases struggle because of the preferential treatment large corporations get.
Aug 23, 2013 8:20PM
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Being a small business owner myself,I am continually penalized daily for being a 'commercial' account...They charge me more EVERYWHERE because Im 'commercial',,basically just because I own a business,,,Being a positive person and an optimist,Ive always tried to look at the goodside anyway,yet lately I find myself saying over and over"NO WONDER A SMALL BUSINESS CANNOT MAKE IT IN AMERICA TODAY!"
Aug 26, 2013 9:55AM
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It is so hard for low information voters to figure out the simple things. Big Corporations run the government. Big Corporations don't want you to be self sufficient because then, you wouldn't need to buy their products. Now that makes sense to anyone willing to think for more than 5 seconds.
Aug 26, 2013 9:37AM
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And these are the ones big government wants to tax and regulate to death. It is the tax-dodging multinational huge corporations that can just police themselves, according to the politicians that they own.

 

At the heart of this is the fact that D.C does not want any of the citizenry to be self-sufficient. They want complete dependency by, and control of, the populace.

Aug 26, 2013 9:21AM
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Most folks understand the fact that a company has expenses, small, medium, or large. Most folks understand that gross revenues and net revenues are different. Seem some posters think otherwise. Fact is, when you have a successfully business, likely it isn't solely because of you alone. There are others involved, and usually in a big way. That hardly means they are paid the same as you, that isn't the point. No posters is stating that. However, some think they are  a island unto themselves. Some think they should still reap all the rewards, in spite of the fact they are hardly still doing all the work. Of course, there is a certain amount, the founders of a given company are entitled too. That hardly means future workers should be treated as slave labor while you treat yourself like a KING.

When it comes to Net Income, those numbers can be so manipulated so I won't bother to expand on it.
Aug 26, 2013 10:50PM
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What's with the thumbs down for my comment to Vishus?

Don't like the f*cking truth? Whether the person who gave my comment a thumbs down, wants to admit it or not, a scared person is much EASIER for GOVERNMENTS AND CORPORATIONS TO CONTROL.  Want proof? Let a couple of bombs go off, have a few shootings in public places, and voila, idiot people and corrupt politicians start SCREAMING for more useless laws that restrict more freedoms and DON'T solve the problem. Afraid of losing your job because the unemployment rate is so high due to government policies? THAT'S why corporations LOVE high unemployment rates.  They HAVE YOU BY THE BALLS. They can pay LOWER wages, got people running scared, afraid to stand up for their rights, because they can get a replacement for you tomorrow. No GD problem for them!!!

Aug 26, 2013 1:53PM
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Vishus

 

And, OF COURSE, the more AFRAID people are, the BETTER the corporations and fascists LIKE IT. A scared person is MUCH easier to control.

Aug 26, 2013 1:22PM
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There's only one problem Jacob Wentz,

 

And that is the so-called "progressives" [read socialists, communists, what have you] don't WANT you to start a small business and succeed. THAT will make you independent [especially of them and the government programs they're promoting]. They don't want THAT.

 

You want proof, all you doubters out there? Try and start your own business, without these rats coming out of the woodwork looking for money [yours of course], using every bit of stalling tactics that they can, in the form of paperwork that you MUST fill out in triplicate [Why? What business is it of theirs?], inspections, [which in a LOT of places you WON'T pass unless some money changes hands], etc. Oh yes, also kissing the a$$ of every petty, stupid, bureaucrat, with more time on his hands than brains. they ONLY thing they've learned since they've been hired, is to throw ANY AND ALL IMPEDIMENTS in your way. God forbid THEY should actually HELP YOU. [Which is supposedly their job] And you KNOW GD well you'd better treat him/her like a king/queen, or they'll do their DAMNDEST to put you out of business.

 

 

Aug 26, 2013 3:57PM
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So how many of these job creators make more than $1,000,000 per year? If we tax the people that make more than $1,000,000 per year they will not create any jobs I thought I heard that somewhere. I am sure all of them multimillionaires are the ones who own all of these business with 3 people, don't you think so. 
Aug 23, 2013 1:53PM
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republicans have been stating this about small businesses for years.  oh my god the republicans were right?  heaven forbid.
Aug 26, 2013 11:38AM
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The so-called ObamaCares Act is becoming less popular before it's even fully in place for one simple Reason. Republicans are funding Millions if not Billions in daily, weekly, and yearly misinformation campaigns. They are doing the same concerning Climate Change and Unions. Republicans are creating in effect, a Godless America. The irony is that they are very ones that preach from the Bible. They just have a very difficult time of living from it. If you don't believe me, go back an Read what the Bible actual states.

Republicans can vote 40 plus times to repeal ObamaCares but they can't sit down for one minute and offer improvements. Fact is, the Republican Party has ZERO answers on how to address the rising cost of Health-Care. I mean really folks,when are you guys going to offer America any Real Solutions that actually helps to solve our problems. This Feed the already SuperRich hasn't worked, and it never will.

I am all for reducing any undue burdens on Small Business Owners and even reducing taxes on the business itself. However I tire of all the BS excuses of those that Fail and blame the Government instead of where it truly lies most times, themselves. These folks expect you to go through hell to reach the American Dream, however they want a cakewalk for themselves.

Aug 26, 2013 9:10AM
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If it was so darn tough to start a small business, so many folks wouldn't be doing it. Fact is that it isn't. What is hard is staying dedicated to the task at hand. How is that on one hand, some folks want others to jump to hoops and multiple jobs so that they don't need any government aid yet they refuse to do what's necessary to make their small business succeed and fall back on continually excuses. And that's just exactly what they are, excuses. You didn't hear those excuses from founders of the likes of Google, Facebook, etc, etc, etc. Most business fail within a time period simply because folks lose dedication and simply at times, can't run and or expand a business. Starting a business is one thing, building it out on a large scale usually takes far more than what the original founder has knowledge of.

Now one poster made an very important point, those insurance crooks ripping him off. Most folks have a long way to go before any taxes and or regulations cause major headwinds since most are losing money and are just simple money pits. Those that are doing very well, taxes and regulations are hardly a problem. It has become more of a built in excuse after failure and or greed. Take your pick.

Aug 26, 2013 1:49PM
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Let me see if I have this right, according to some folks, Mega Corporations who fully support Republicans and hate competition and or your self independence are the road to prosperity. I mean what are these folks smoking. I have plenty of friends that have started a successful business, in fact several. The problems they faced were getting enough folks to besides themselves to be dedicated to the business. Starting a Real business is hard work. Starting a phoney one, maybe not so as much. Seems that what most tax free 501(c)s are.

It is far easier to start a business now than ever before and folks are doing it in DROVES. The rest are making excuses. We clearly see that more folks are starting a business as they tire of doing all the work yet reaping little of the benefits at their old jobs. Meanwhile certain groups prefer to play the blame game, blame anyone but themselves. Big Banks and Big Corporations don't want any new competition. So either they buy you out and or try and de-fund you.

Aug 24, 2013 1:14PM
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But how many of the jobs created are there one year, two years, or especially 5 years later? The answer is that a majority of those microbusinesses fail well be for 5 years, and the jobs die with them.
Aug 23, 2013 10:09AM
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This is really only news to those who don't understand how and why jobs are created.   Unfortunately for us, Obama is one of those people.  He might find this article enlightening, but he's probably too busy with his new dog, or planning his next million dollar vacation.
Aug 23, 2013 3:19PM
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small businesses are great but you will never make more than 10 to 12 an hour, After taxs you are making 375 a week. you will be broke as you do most work and owner drives mercedes. But still a job just not enough to survive
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