Lost in the shuffle of the COVID-19 pandemic and social unrest, the Small Business Administration (SBA) recently released a new report that should matter to all Americans. The SBA’s annual “Small Business Profiles” encapsulate just how important small businesses are to the U.S. economy—and working Americans.
At a time when anti-business rhetoric is everywhere, it’s important to step back and truly understand the cold, hard numbers.
So, what do the numbers say? Small business is everywhere. It is all around us, changing our lives without us even knowing it.
According to the SBA, America is home to more than 31 million small businesses (31.7 million, to be precise), which employ nearly 61 million workers—half of the private-sector workforce. In fact, small businesses account for 99.9 percent of all U.S. businesses. Think about that for a second: While the likes of Facebook garner the headlines, nearly all of America’s businesses are classified as “small.” (Generally speaking, small businesses are defined as firms with fewer than 500 employees.)
Small business is a job-creation engine that powers the entire economy. In 2019, small businesses created 1.6 million net new jobs, with firms employing fewer than 20 workers seeing the largest gains (1.1 million net new jobs added).
That’s not all. In the United States, there are more than 285,000 small business exporters, which connect the U.S. economy to the rest of the globalized world. Even in these terms, 97.5 percent of America’s exporters are small businesses. Without them, our “globalized” economy would be far more isolated.
When you think about it, in terms of exports and imports, U.S. small businesses directly and indirectly create millions of jobs at home and abroad. How many countries rely on America’s small business exporters for vital goods and services? How many foreign workers rely on them for financial security?
Which brings us to the most significant impact of small business: Purchasing power. Autonomy. Independence.
If entrepreneurship is the backbone of the U.S. economy, then small business is a vehicle to economic prosperity—for entrepreneurs and those who depend on them. In fact, small business is perhaps the free-market economy’s single most important tool of economic empowerment.
This also cuts across racial lines. As we discuss and debate African-American empowerment, it’s important to note that America is home to more than five million self-employed minority entrepreneurs. About five percent of all self-employed Americans are black. Another 10 percent are Asian, while yet another eight percent are Hispanic.
Of course, self-employment is only the tip of the proverbial iceberg. But the prevalence of minority communities in the self-employed economy is a testament to the economic empowerment associated with small business. For those who are willing to take the risk, small business can be and is a potentially transformative way of achieving success—regardless of skin color. No government program can match it.
This makes the coronavirus an even more difficult pill to swallow. Minority small business owners have been hit especially hard by the COVID-19 economy and the resulting economic shutdown. Indeed, over 40 percent of African-American business owners report that they didn’t work in April. Nearly one-third of Hispanic business owners say the same, followed by 26 percent of Asians. It goes without saying, but their employees are suffering too. So are job-seekers, who rely on small business for career opportunities.
As the SBA confirms, wreaking havoc on small business means wreaking havoc on the U.S. economy writ large. The economic shutdown affects employers, workers, and job-seekers—all of the above. Unfortunately, the final economic toll of the COVID-19 pandemic on smaller businesses is yet to be seen. (The SBA’s research only captures “the early stages of the pandemic.”)
If there is a silver lining, it is this: Entrepreneurship never sleeps. The backbone of the U.S. economy has not been killed by the novel virus. Since mid-March, the Census Bureau has tracked well over 500,000 applications for an employer identification number. This means new businesses, new jobs, and a new wave of economic empowerment.
When small business owners succeed, we all reap the benefits. Let’s hope for a small business rebound sooner rather than later.