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Myths and Realities About Small Businesses and Jobs

Politicians and the small business lobby regularly claim that small businesses are the main drivers of growth in the U.S. economy, but the facts show otherwise, as I explain in an op-ed in today’s New York Times. Here’s the opening:

I challenge you to find a stump speech by a politician running for any office from dog catcher to president that doesn’t invoke the importance of small businesses.

That’s not necessarily a bad thing. It’s a hat tip to American entrepreneurialism, evoking images like that of Steve Jobs planting a seed in his garage that grew into an amazing Apple orchard.  Besides, don’t most people work for small businesses, and aren’t such businesses the engine of job growth?

Actually, no.  In what may be the most misunderstood fact about the job market, although most companies are small — according to 2008 census data, 61 percent are small businesses with fewer than four workers — more than two-thirds of the American work force is employed by companies with more than 100 workers.  You can tweak the definitions, but even if you define “small” as fewer than 500 people (as the federal government does, basically), you still find that half the work force is employed by large businesses.

Click here for the full piece.