Small Businesses Celebrating on a Tight Budget This Year.
But can anyone afford the party favors this year?
One of the uplifting facts of entrepreneurship is that many successful founders start their businesses in slow economies. However, that hasn't been the case in the past five years when entrepreneurial startups have declined. We can thank our elected officials and policymakers for contributing to an environment that make starting, nurturing or growing a small business difficult at best.
Missing a low target
As I wrote this, January through March growth figures were released. Experts expected a lousy number, like an annualized rate of 1 percent. If only it had been that good! The U.S. Commerce Department pegged first quarter 2015 growth at 0.2 percent annualized.
In other words, it’s essentially no growth. This comes after last year’s growth was a paltry 2.4 percent. Some pundits will point to the snow storms – as if winter is supposed to be a season for shorts and muscle-tees – but that can, at best, only explain for a small part of the problem.
It’s interesting that “income disparity” and the minimum wage have become major national media stories while the disparity between large companies and small businesses has been virtually ignored. Goldman Sachs recently released a report that shows how poorly small businesses have faired during this recovery when compared with large corporations. In fact, historically, small firms, those with fewer than 500 employees, have outpaced big companies in terms of job creation. That situation has reserved transforming our economic landscape.
Small Biz is MIA
As I noted, the real number of small business firms has declined and revenues have failed to keep pace. Let's take a closer look at what that means. If we take the historical small business growth rate that the U.S. experienced between 1977 and 2007, and project it through 2012, we fall 600,000 small businesses short.
There should be another 600,000 small businesses located across the fruited plain. Think of how many jobs that would add to our economy. There would be work for those millions of individuals who have simply dropped out of the labor force. It would also put labor market pressures on wages and tend to push up entry-level incomes. We probably wouldn’t need a national debate about the central-government-imposed minimum wage.
How will it ever be possible to ease the income gap with these kinds of economic conditions? No fiats from Washington, D.C., will change that reality. In fact, so far virtually everything our politicians have done has made the situation worse.
When few people are founding new small businesses, it kills the biggest opportunity individuals have to move themselves into the upper income levels.
Owning vs. earning
The only real path for upward mobility is to move from being a wage-earner to a property-owner and the property I’m talking about is a business. When small business formation is as anemic as it is today, you can’t logically expect any other outcome than a widening gap between the rich and the poor.
So as we approach National Small Business Week in 2015, this year I think we need to celebrate the “potential” of small business ownership and entrepreneurism, and also give a special pat on the back to those owners who are surviving or thriving in this era of slow-to-no growth.
As I said at the top, entrepreneurs can be successful even in the worst of times, but let’s hope they aren’t forced into that position for much longer.
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