Tomorrow I’ll be writing about small businesses, namely because I co-own and manage one and because I see that many folks don’t seem to understand how small businesses work, or what all the hullaballoo with Joe the Plumber is about. Small business owners and the self-employed are scared to death about Obama, and may well turn the election to the McCain side, all because Barack Obama said he wanted to “spread the wealth around,” and raise Joe the Plumber’s taxes. Obama said he was going to tax Joe’s revenue, and by using the word “revenue,” he struck fear into the hearts of small business owners everywhere who wondered with alarm if they’d heard him right (they did, but more about that tomorrow).
But Obama also said that small businesses are what make this nation succeed, and that small business provides all the new jobs in the U.S., and he was right about that. So, for your educational pleasure, here are some facts and statistics on small business for those of you who have never owned a small business, considered running one, or worked for one.
According to the Small Business Administration, a small business is a business that has fewer than 500 employees. When congress passes laws that affect small businesses, most usually any business with fewer than 50 employees is exempt. So, for example, if universal health care is ever passed, it’s possible that businesses with fewer than 50 employees will be exempt. Firms or businesses with fewer than 20 employees are the smallest of the small. This will give you an idea of what they mean when they say “small business.”
In the U.S., small businesses:
- Represent 99.7 percent of all employer firms.
- Employ about half of all private sector employees.
- Pay nearly 45 percent of total U.S. private payroll.
- Have generated 60 to 80 percent of net new jobs annually over the last decade.
- Create more than half of nonfarm private gross domestic product (GDP).
- Hire 40 percent of high tech workers (such as scientists, engineers, and computer workers).
- Are 52 percent home-based and 2 percent franchises.
- Made up 97.3 percent of all identified exporters and produced 28.9 percent of the known
export value in FY 2006. - Produce 13 times more patents per employee than large patenting firms; these patents are twice as likely as large firm patents to be among the one percent most cited.
- Small businesses with fewer than 500 employees created 78.9 percent of all new jobs in the U.S.
- Large firms with 500+ employees added 21.1 percent of all new jobs over the past 10 years.
- Small businesses employ half of all U.S. workers.
- Very small businesses with fewer than 20 employees annually spend 45 percent more per employee than larger firms to comply with federal regulations.
- Small firms spend 4.5 times more per employee to comply with government regulations, and 67 percent more per employee on tax compliance than larger businesses.
According to The Small Business Economy: A Report to the President, from The Office of Advocacy of the U.S. Small Business Administration (SBA) 2007 report:
- In 2004, small businesses with fewer than 500 employees accounted for all of the net new jobs.
- Small firms had a net gain of 1.86 million new jobs.
- Larger firms with 500+ employees had a net loss of 181,000 jobs in the same year.
- Small firms employed 50.9 percent of all private sector work in 2006.
- As a group, small business purchasers outpace federal government purchasing.
- Most of the payroll (two-thirds) paid in the U.S. in the private sector was in firms with 20-499 employees.
- About half of 16.7 million small business owners were home based. That’s right: they were working from their kitchen tables, garages, home shops or home offices.
Most small businesses are family-owned and are being run by a fellow and his wife, or a mother and daughter, or whole families. A tailor shop in my community is run by a Vietnamese family. Father, mother, aunts, uncles, adult children, grandchildren, nieces, nephews and friends all work in the shop and have run it successfully for more than 15 years. This tailor shop is a small business. It is this type of small business that is coming under attack by the party that wants to penalize mom and pop for succeeding at working for 10-12 hours a day, six days a week, so that their own kids can go to college and work in an air-conditioned office and sit behind a desk rather than a sewing machine.
This is what has people up in arms. This is what I’m going to explain so that some understanding is generated about the furor over Joe the Plumber.
