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How Small Businesses Can Ease America's Job Shortage Why the country's unemployment continues to be high and how new business startups could be the answer.

By David Nilssen

entrepreneur daily

Opinions expressed by Entrepreneur contributors are their own.

The rate of unemployment in the U.S. has been declining more or less steadily since the beginning of 2010, and we're getting closer and closer to the 6 percent rate that the Federal Reserve considers to be in the range of "normal" unemployment.

But this seemingly good news is covering up a very troubling reality. The unemployment number doesn't tell the whole story because it only counts people who have registered as unemployed and who are actively looking for a job. Over the last few years, scores of Americans who lost their jobs in the recession have given up looking for work entirely, and they go uncounted in the unemployment statistics.

The labor-force participation rate, on the other hand, shows a much scarier picture: the number of U.S. adults participating in the workforce is the lowest it's been since 1978.

Related: More Post-Recession Jobs Paying Lower Wages

Why are so many people still out of work? Baby boomers' retiring are responsible for some of the decline in the participation rate, but that only explains a fraction of the drop. The real problem is that our job creation engine in this country has stalled.

There are simply not enough jobs being created today to put Americans who were laid off during the recession back to work, while also accommodating the 2 million people who entered the workforce since 2008. At the current rate of job creation, economists estimate that it will take until 2019 to get employment back to where it was before the recession.

I don't think we can wait that long. But I have an idea: Let's light a fire under the best job-creation engine there is. Small business! Small businesses account for almost half of existing jobs in the private sector, and they are responsible for almost two-thirds of net new jobs in America.

In particular, new small businesses (startups and franchises) are the most powerful group when it comes to creating jobs, according to the National Bureau of Economic Research. Startups account for only 3 percent of employment, but they account for 20 percent of net new employment.

More than 500,000 small businesses were started in 2010, according to the U.S. Census. That's good, but it's not enough. What can we do to encourage more small business startups? Nearly half of Americans dream of starting their own business: How can we give them the push and the support they need to actually do it? We can start by asking Congress to make the path to entrepreneurship a little bit easier:

Related: What Will Get Americans Working Again?

1. Let's improve access to credit for entrepreneurs. And while I've recently seen some great use of crowdfunding; it's not the long-term answer. Access to credit has improved for large corporations, but things have never been worse for small busineses.

The Small Business Administration has made some progress in recent years, but it's not enough. We need more incentives for banks to lend to small businesses, and we need more support for alternative funding methods, too. There are many other options for entrepreneurs that deserve more attention.

This can include, but is not limited to, SBA Express loans, royalty or revenue based financing, rollovers for business startups and more.

2. Let's simplify the tax code for small businesses. The majority of business owners spend more than 40 hours each year dealing with federal taxes, according to a survey by the National Small Business Administration. That's a huge waste of resources that would be better spent growing the company. It's time to simplify, simplify, simplify.

3. Let's ease the regulatory burden on small business. Federal agencies issue new requirements on a continual basis, far too often for a small business owner to keep up with. On top of that, small businesses pay 36 percent more than their larger counterparts to comply with federal regulations, according to research compiled by the Small Business Administration. We need Congress to realize that small businesses and large corporations are different, and then treat them as such.

It's been almost five years since the recession ended, and still the country is still stuck in an employment slump. Many Americans have already lost hope, and new college graduates are entering a job market without enough positions to sustain them.

We are in dire need of a job-creation boost, and encouraging small business startups is the best way forward. Let's do everything we can to help new small businesses start up, grow and put Americans back to work.

Related: Has Access to Capital Really Improved for Entrepreneurs? (Infographic)

David Nilssen

Entrepreneur, Investor, Author, Philanthropist

David Nilssen is the co-founder and CEO of Bellevue, Wash.-based Guidant Financial. The company helps entrepreneurs invest their retirement funds into a business or franchise without taking a taxable distribution or incurring penalties; it also aids business owners in securing Small Business Administration loans.  

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