In the following four quarters, through Q2 of 2021, small businesses created 5.5 million jobs, a 60% recovery from the pandemic-era decline. According to the SBA, during the first two quarters of 2020, at the start of the pandemic, 9.1 million jobs were lost. Small business job creation was pivotal in the wake of the COVID-19 pandemic as well. In the same period, large businesses only added a net 6.7 million jobs, the SBA reports. According to the SBA, small businesses created a net 12.9 million new jobs in the last 25 years, which accounts for roughly 66% of all jobs created in that span. While this might seem obvious, it is incredibly important. The first way small businesses impact the economy is through job creation. Here are three ways small businesses contribute to the economy. Small business has long been seen as a boon to local economies, but why is that? Small businesses help boost a community’s broader economy in several concrete ways that bigger businesses cannot. How small businesses benefit local economies Small businesses, on the other hand, have to outsource these functions and usually do so to professionals within their local or regional communities – professionals who are likely to spend that money in the same community. This is because big box and large corporations have internal systems for services such as accounting, legal, supply and maintenance that are not necessarily based within the county or state. Goetz said his research shows that small businesses directly benefit local economies – much more so than large businesses. “Small, locally owned businesses and startups tend to generate higher incomes for people in a community than big, nonlocal firms, which can actually depress local economies,” said Stephan Goetz, professor of agricultural and regional economics at Penn State and director of the Northeast Regional Center for Rural Development, in a statement published alongside the research. Small businesses account for nearly half of all economic activity in the U.S. In a post-pandemic world, small businesses have been the backbone of economic recovery and job growth. That same year, small businesses created two-thirds of all jobs in the U.S. Small Business Administration found that small businesses generated 44% of all economic activity in the country. Small businesses are an important economic engine for both local communities and the national economy.Ī widely cited 2019 report from the U.S. However, despite the relative absence of small businesses from the headlines, they drive a considerable portion of the American economy. It’s true that large businesses are seeing their market share increase in a wide range of industries in the wake of the COVID-19 pandemic. We see layoffs by Tesla, a contract won by Lockheed Martin, a company acquired by General Motors, or a new innovation from General Electric. When we check business news each day, it’s usually big companies that dominate the headlines.
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