Filed Under:  Business, National, News

Small Businesses: Bigger than you think, more important than you know

3rd December 2013   ·   0 Comments

By Nisa Islam Muhammad
Contributing Writer

WASHINGTON (Special to the NNPA from The Final Call) – Supporting job creation among Black business owners and starting more Black businesses are two solutions to stagnant unemployment numbers in the Black community.

“There are 1.9 million Black businesses in America and 1.8 million of them are sole proprietors, only 100,000 Black businesses have employees. The challenge is growing these businesses to hire at least one employee, that’s 1.8 million jobs,” David Smith II of the U.S. Black Chamber, Inc. told The Final Call in an interview.

Businesses with fewer than five employees are called microbusinesses. Since 2002 they have created 5.5 million jobs. While large businesses (500 plus employees) lost jobs between 2009 and 2011, microbusinesses were the only ventures creating jobs during the same period, according to Gina Wood of the Bipartisan Policy Center. She made her comments during the release of a new report by the Association for Enterprise Opportunity, “Bigger Than You Think: The Economic Impact of Microbusinesses in the United States.” The report was released Nov. 14 on Capitol Hill and included a discussion of the importance of these businesses.

“Microbusinesses are the engine of job growth in this economy. They are essential to our economy,” said Ms. Wood. “They are the new normal and we must recognize microbusinesses as part of the solution. They are indispensable to the economy.”

The 25.5 million microbusinesses in America range from endeavors of part-time newcomers to business full-timers with more than $50,000 plus in sales and receipts, according to the report. In 2011 these businesses accounted for 26 million jobs in the U.S. economy, the report said.

Those numbers don’t tell the whole story: Another 1.9 million jobs are created indirectly as a result of microbusinesses. The indirect economic impact occurs when a microbusiness buys a computer or supplies, the report said.

Some 13.4 million jobs are “induced” by microbusinesses when owners and or employees make personal purchases, the report added.

“There is a total of 41.3 million jobs attributed to microbusinesses,” said Connie Evans, president and CEO of the Association for Enterprise Opportunity, which advocates for policies and legislation that advance the interests and needs of America’s 25.5 million microbusiness owners.

“This study offers evidence that microbusinesses create a variety of economic impacts, producing salutary effects on families that cut across racial, ethnic, and gender lines. Based on previous insights, we’ve understood that microbusinesses are vital vehicles that put the unemployed to work, help families achieve economic self-sufficiency, and narrow America’s wealth gap,” said Ms. Evans, whose group is based in Washington, D.C.

The report touts microbusinesses as a great equalizer between those with college degrees and those without. College degree holders constitute 52 percent of microbusiness owners, but the report showed no significant difference in median annual sales and receipts for those with degrees and those without. Ninety-two percent of all U.S. businesses are microbusinesses, the report said.

“It’s great to have a small business that turns into Google, but it is also great to have a small business that hires one employee and then hires one more,” remarked Jason Tepperman, director of the Small Business Lending Fund at the Department of Treasury, during the panel discussion.

AEO research suggests that if one in three microbusinesses hired one person—which would equal about 8.4 million jobs—the country’s unemployment problems could be virtually solved through employment and additional economic activity.

The Labor Dept. Nov. 8 reported 11.3 million people were unemployed in America. “We supported this research as part of our racial equity approach. We thought it was important to explore and to document the economic impact and potential of microbusinesses to influence ongoing work of eliminating poverty and improving opportunities for vulnerable families and their children,” said Dr. Gail Christopher, a W.K. Kellogg Foundation vice president.

“The findings make it clear that support for microbusiness development must be part of national and local policy discussions related to equity and racial healing,” she added.

Black microbusinesses employed almost 117,000 people in 2007; the latest year data was available, for a total payroll of about $3.5 billion. Most of these microbusiness owners (1.68 million) were working owners.

The 1.8 million Black-owned microbusinesses in 2007 ranged from professional services to health care and social assistance to administrative and support services and manufacturing, which was the fastest-growing sector for Black businesses, the report found.

Microbusinesses were described as a viable option for “unemployed persons, persons 50+ and underserved groups such as women and Blacks to attain self-sufficiency amidst a mercurial labor market, and as long-term job stability becomes more elusive. For these demographics, self-employment offers a pipeline to wealth-creation that might not otherwise be possible.”

“Microbusinesses make a much larger impact than they get credit for, making them a vital strategy to any solution for reinvigorating and sustaining broad-based economic growth. We argue they are worthy of continued advocacy for increases in financial investment and policy support,” said Ms. Evans.

Also according to the report, microbusinesses generated approximately $4.87 trillion annually for the U.S. economy and microbusiness owners accumulated a median net worth of nearly 2.5 times higher than non-business owners.

This article originally published in the December 2, 2013 print edition of The Louisiana Weekly newspaper.

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