If you had a dollar for every time a campaigning politician said that small businesses create most American jobs, you might have enough money to actually launch a small business. Politicians regularly claim that small businesses create between 60 and 80 percent of new jobs in this country. That particular political-economic axiom has become so entrenched in the national dialogue that it\u2019s rarely challenged. But is the premise correct, are the numbers accurate, and do politicians really believe their own small-business rhetoric?<\/p>\n
To start that discussion, you have to define \u201csmall.\u201d It\u2019s probably fair to say that, when politicians talk about \u201csmall businesses,\u201d they\u2019re hoping to conjure images of the kind of mom-and-pop shops idealized in movies from the 1940s and 50s. [Think of \u201cIt\u2019s a Wonderful Life,\u201d for example.] They would love for us to believe that corner markets, tiny family-run farms and one-or-two person home-office-based startups are the small businesses that they want to protect. Those are feel-good, sympathetic\u2014but cynically created\u2014images that perpetuate the idea that capitalism works for everyone and that government regulation of the \u201clittle guy\u201d is what is killing American jobs.<\/p>\n
Unfortunately, the facts of American economic life add up to a very different bottom line. First, that vaunted, sepia-toned image of small business is a distortion. The government agency charged with guaranteeing loans for \u201csmall\u201d businesses\u2014the inaccurately named Small Business Administration\u2014defines a \u201csmall\u201d business as one with fewer than 500 employees That’s not exactly your average, garage-based tech start up.<\/p>\n
In addition, says economist Jared Bernstein, \u201calthough most companies are small\u2014according to 2008 census data, 61 percent are small businesses with fewer than four workers\u2014more than two-thirds of the American work force is employed by companies with more than 100 workers.\u00a0 You can tweak the definitions, but even if you define small as fewer than 500 people\u2026you still find that half the work force is employed by large businesses.\u201d<\/p>\n