While our economy's improved on paper, the majority of us know in our gut that isn't the entire story. During the last couple of years, quality job creation continues to be anemic, and too many workers have jobs that don't allow them to support themselves as well as their families. Since the end of the Great Recession, 11.3 million jobs happen to be created – but average wages have dropped 23 percent. The very best five fastest-growing occupations have been in low-wage work, in personal care and also at places like strip malls and fast-food restaurants. They are all jobs which need some type of public assistance. We hit another tipping point as 2022 began: middle-income households have grown to be the minority in America for the first time since The second world war. And African-Americans and Latinos fare a whole lot worse.
We Need New Priorities: Think Local. Think Small.
As our nation's job creators, small businesses could be a area of the solution. Based on the Federal Reserve Bank of Atlanta, places with a high density of locally-owned businesses have higher incomes and better employment growth, and much less poverty. And, economists at Yale and also the University of Bristol write that when in high unemployment, small businesses both create and retain more jobs than large companies do, and they fully recover from recessions much faster than large companies.
In fact, they're currently outpacing national chains and mega-retailers while facing enormous challenges:
- One-in-three independent companies that requested a bank loan within the last 2 yrs didn't secure one. That figure was 54 percent among businesses owned by people of color, and 41 percent among young firms, whose expansion has historically been a key source of net job growth.
- Large national chains use their market power to secure better pricing and terms low cost, and outspend smaller businesses on advertising and marketing.
- Majorities of small businesses an uneven arena when it comes to economic development money, and say regulators should more vigorously enforce antitrust laws.
If we help empower small businesses to increase their competitiveness while at the same time creating quality jobs with better wages, then every community and worker in the usa benefits. These things may sound idyllic, but they’re facts:
- Jobs at smaller businesses tend to be more secure about their jobs because small-business owners aren’t pressured by stockholders’ profit expectations, and layoffs are usually used only as a last resort
- Small and independent businesses employ more people directly per dollar of revenue, and they're the shoppers of local printers, accountants, wholesalers, farms, attorneys, etc., expanding opportunities for local entrepreneurship
- They also generate more tax revenue per sales dollar, so a greater number of local independent businesses keeps your taxes lower
- Each dollar spent at an independent businesses returns 3 times more money towards the local economy than a single spent in a chain (and hundreds of times a lot more than buying from Amazon)
- Small businesses typically consume less land, carry more locally-made products, locate nearer to residents, and create less traffic and air pollution
- Compared to big businesses, smaller businesses donate a lot more than twice as much per sales dollar to local nonprofits, events, and youth sports teams
There are lots of good reasons to favor local small businesses, however it comes down to this: a community's degree of wealth and well-being is positively associated with the amount of its local economy held by local businesses, and median incomes have risen faster in places with increased small businesses than others covered with big businesses.
Small Businesses Are Growing, But State Policies Are Short-Changing Them
Independent businesses experienced healthy sales growth and expanded hiring in 2022, according to a large national survey in the Institute for Local Self-Reliance. In fact, small businesses saw a 3 percent jump in sales throughout the holiday season, versus just over 1 percent in particular national chains. This local-first success means more jobs! Smaller businesses saw a significant rise in hiring, with overall employment in the independent businesses surveyed expanded by 5.6 percent in 2022.
Politicians whatsoever levels routinely praise smaller businesses for their “mom and pop” feel as well as their contributions to job creation, but states actually give big businesses the dominant share of their economic development incentives. An analysis from Good Jobs First discovered that large national companies received 70 % of those deals and 90 % from the dollars – and a lot of those deals and awards have barriers to entry that exclude smaller businesses entirely.
States' policy priorities are exactly backwards with regards to creating good jobs, according to another report from The Center On Budget And Policy Priorities. To construct strong economies, states should focus on producing more home-grown entrepreneurs as well as on helping young firms already found in the state to survive and also to grow ― not on cutting taxes and trying to lure businesses using their company states.
According the data, the vast majority of tasks are created by businesses that already are present in a situation – not through the relocation or branching right into a state by out-of-state firms. Economic development policies that ignore these fundamental realities about job creation will likely fail. One good example is the utilization of deep income tax cuts to spur business growth: it's an extremely wasteful method to help smaller businesses. And those same cuts take money from schools and other public investments like infrastructure essential to producing and supporting the talented workforce that entrepreneurs need.
Now Is The Time
We can transform our economy into a quality jobs economy, and today it's time to begin. Small business owners are newly stable, and based on the 2022 State of Small company Report over half said they intend to hire new employees this year. We're also beginning to see positive outcomes from local governments and companies that are boosting wages and benefits. What began as a protest by junk food employees in 2012 has led ten major cities and over twelve states to consider legislation or develop initiatives to improve the minimum wage.
Here within the San francisco bay area, the city of Emeryville implemented a $15-an-hour minimum wage. The city caused small business owners to phase the increase in with time, and a predicted backlash never materialized. Workers making the minimum wage are reporting that, for the first time, they can pay the bills and start to repay debts. And there is more income flowing locally. This story is happening across almost every city that's raised its minimum wage. A Goldman Sachs analysis of 13 states that raised their minimum wage found “the states where the minimum wage increased had faster employment growth than the states in which the minimum wage remained low.”
The effects are starting to ripple upward, as positive experiments in higher wages are making the case for themselves increasingly more. Higher wages benefit business by increasing consumer purchasing power, reduce costly employee turnover, raise productivity, and improve product quality, customer satisfaction and company reputation.
Couple these common-sense learnings whenever a changing policy and business environment that favors B-Corps (a brand new type of corporate entity permitted to decide based on social good along with shareholder good) and a generational shift that's resulted in the development of social enterprises (firms that make profit whilst achieving social, cultural, community, and/or environmental benefits) and that we can easily see an inflection point approaching.
Toward A Quality Jobs Economy
There’s no one cause behind rising inequality and also the expanding quantity of working poor. Stagnant wages, rising housing and food costs, expensive and segregated education, policies that favor globalized corporations over local economies, neglected transportation infrastructure. Everything adds up — At PCV we’re buying a new quality jobs economy based around small , local business owners as a way to help turn the tide.
Our small business lending program is filling the gap for entrepreneurs who can't access capital from a traditional bank or the Sba. Our free small company mentoring program brings top talent to Main Street businesses, keeping companies sustainable and empowering them to add jobs at 167% above the national average. As well as in the coming months, we're likely to begin rolling out quality jobs research and initiatives to support our fellow CDFIs, the broader impact investing industry, government, and business owners' efforts to produce jobs that are great for workers and employers alike.
We have both a moral and an economic important to fuel social and economic mobility within this country. With support from community economic development leaders, PCV is trying to help meet the needs of American workers today by empowering smaller businesses and driving more capital toward underserved communities.
