Small businesses and drive the economy?
points to research suggesting a tipping point about the notion that small businesses drive the economy:
Martin A. Sullivan (Tax Analysts), New Research Weakens Case for Small Business Tax Relief
The National Federation of Independent Business states on its website: “Small business has created about two of every three net new jobs in the United States since at least the early 1970s.” And on its website, the Small Business Administration claims, “Small firms accounted for 65 percent (or 9.8 million) of the 15 million net new jobs created between 1993 and 2009.” These claims are endlessly repeated on television and in print. And both political parties are perfectly happy to leave them unchallenged. But two new strands of academic research are quietly shredding the idea that policies to support small businesses hold the key to job creation.
- [John Haltiwanger (University of Maryland, Department of Economics), Ron S. Jarmin (U.S. Census Bureau, Center for Economic Studies) & Javier Miranda (U.S. Census Bureau, Center for Economic Studies), Who Creates Jobs? Small vs. Large vs. Young
- Erik Hurst & Benjamin Pugsley (both of the University of Chicago, Department of Economics), What Do Small Businesses Do?]
The whole “small business creates new jobs” is over simplified, because there are many types of small businesses.
That 2/3 figure was a surprise to me. I remember reading in the past year or two that when you account for business failures, the net number of new jobs created by small businesses was about 1/2.
“These findings imply that it is critical to control for and understand the role of firm age in explaining U.S. job creation.” John Haltiwanger et al.
One other, though unintended, consequence of thjose findings suggests that economists start relying on objective data before filling the minds of the political class with the BS they are being paid to provide.
Not having read the studies, my opinion of the “small business creates jobs” meme is that it’s all romanticizing that looks back on the days of the early industrial revolution into the early 1900’s combined with the settling of the midwest and northwest areas. Which gets all balled up in the easier meme “rugged individualist”. By the time we hit the 30’s the ability for one individual to apply technology such that it lead to something like the Wright Brothers, or Dodge Brothers, or Mr. Bendix or Elijah J. McCoy such that we have the saying “the real McCoy” had peaked.
We’re never going to see those days again because the integration of knowledge and thus technology in the simplest of product is so vast. This is not to say there won’t be a Job’s or Gates. There just won’t be hundreds of thousands to millions of them. Even the ability to produce a product requires manufacturing ability that is far removed from the days when many one could purchase a lathe, gather up some forging equipment and build a viable item that reduced the time required for one to accomplish a particular activity.
Also, we are not promoting in our education the concept of a multidimensional student. We have elevated the single dimensional student to being the pinocle of an Einstein. The singularly focused expert has become the standard that our students are to strive for. I beleiee a lot of this has to do with moving the purpose of service of our education system from serving society to serving business. We changed the message from “go to school, get a life” to “go to school, get a job”.
Of course, all of this is in reference to a “production” economy and not a financialized economy or service economy. Which just makes the idea that small business is now driving our economy or could drive our economy currently even more rediculous. Though the service economy could be a bigger player in driving the economy if we had not chased ever cheaper stuff and allowed the consolidation of all retail (which includes our media, banking, agi, besides just stores).