Small Businesses Impact Economy in Nuanced Ways

The old trope that small businesses are the backbone of the United States economy is actually a complicated truth, says a new report from the U.S. Small Business Administration (USSBA).

Small businesses create over 66% of net new jobs and account for 44% of U.S. economic activity, according to the report from the USSBA. They make up a significant portion of the gross domestic product (GDP) and create the infrastructure for small local economies throughout the country. However, Economic Columnist Georgina Tzanetos argues that the USSBA's numbers should be taken in context. She tells that studies find new businesses account for virtually all new job creation in the U.S., along with 20% of gross job creation – and by definition, new businesses are small. Additionally, the SBA found that only one-third of new businesses survive to see their tenth year. Given these data points, Tzanetos argues that as a result, small businesses end up being "job churners" and "layoff machines," contributing to the new job numbers but not the job growth numbers.

As for small businesses' impact on economic activity, The MIT Press found that nearly 75% of all small business owners don't want to grow their businesses and would rather keep them small. These business owners aren't looking to start multi-million dollar enterprises, Tzanetos says – they just want to be their own bosses, make their own hours, and create workplaces that cater to their lifestyles and needs. Professions like dry cleaners, accountants, dentists, gas stations, restaurants, doctors, lawyers, plumbers, electricians, and others qualify as small businesses. Tzanetos says that these professions are truly America's backbone both economically and interpersonally. These professions all play a massive part in influencing the GDP. And beyond just their economic value, they provide necessary services in their local communities, both as vendors and consumers of others' small businesses.