WASHINGTON, D.C. – Small businesses are the lifeblood of the U.S. economy: they create two-thirds of net new jobs and drive U.S. innovation and competitiveness.
A new report shows that they account for 44 percent of U.S. economic activity. This is a significant contribution, however this overall share has declined gradually.
U.S. gross domestic product (GDP) is the market value of the goods and services produced by labor and property located in the United States. Across the 16 years from 1998 to 2014, the small business share of GDP has fallen from 48.0 percent to 43.5 percent.
Over the same period, the amount of small business GDP has grown by about 25 percent in real terms, or 1.4 percent annually. However, real GDP for large businesses has grown faster, at 2.5 percent annually.
Winning Against the Odds
Despite providing the economy with an overwhelming number of benefits, small businesses don’t receive the same government support as large corporations.
Small businesses do not receive the same tax breaks that are provided for large corporations. Small businesses also don’t receive the same local and state incentives for things like production facilities, or research and development.
Large companies can receive federal bail-out money in times of financial turmoil, an option that is not available to small businesses. Small businesses have the odds against them but continue to thrive.
According to the U.S. Small Business Association (SBA), small businesses of 500 employees or fewer make up 99.9% of all U.S. businesses and 99.7% of firms with paid employees.
Of the new jobs created between 1995 and 2020, small businesses accounted for 62%—12.7 million compared to 7.9 million by large enterprises.
A 2019 SBA report found that small businesses accounted for 44% of U.S. economic activity. Without small businesses, the American economy and workforce would be a pretty wild landscape to imagine.
Not only do small businesses provide more jobs, they also bring careers and opportunities. Successful small businesses put money back into their local community through paychecks and taxes, which can support the creation of new small businesses and improve local public services.
Why are small businesses important?
Small businesses are important for many reasons – job creation, exports, innovation – but perhaps their biggest impact is on their local communities.
In fact, the AMEX 2018 Small Business Economic Impact Study found that approximately 67% of every dollar spent at a small business stays in the local community. This cycle stimulates the economy.
Small companies have the potential to thrive in today’s marketplace, as long as they stay vigilant. They are the lifeblood of the U.S. economy and should use their resources and size to their advantage.
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