As the U.S. economy continues its slow recovery, the persistence of high unemployment has focused the national dialogue on job creation. Although some believe that most of our nation’s job creators are the wealthiest 1% of Americans, recent analysis of employment data shows otherwise.
In October 2011, businesses with fewer than 50 employees comprised 45% of the nation’s non-farm private payrolls, per payroll service provider Advanced Data Processing (ADP). In the past two years, these small businesses increased payrolls more than companies with more than 50 employees. Additionally, research from the Kaufman Foundation indicates almost all net job creation since 1980 took place in companies that did not exist over five years prior.
A further analysis of employment creation points to Hispanic-owned businesses as being the fastest growing fraction among the small business sector. From 2002 to 2007, Hispanic-owned businesses grew at a rate nearly twice the national average, according to the most recent Census Bureau Survey of Business Owners. During the Great Recession, the rate of Hispanic entrepreneurship increased, with even higher rates of entrepreneurship among recent immigrants. [For information on the effects of immigration in California’s housing market, see February 2012 first tuesday article, Lower home price appreciation in socioeconomic enclaves.]
first tuesday take: So much for the (now debunked) trickle-down theory. It wasn’t any good for workers in the days of the serfs and still isn’t any good in these days of growing economic inequality. Economic conditions seem to build from the bottom up, so long as individuals are allowed to instantly start up a business. [For more information on the widening gap between the classes, see January 2012 first tuesday article Social mobility drives home sales volume.]
While it is true that jobs are created among America’s super wealthy investors (as well as through the very innovative tech sector), labeling these groups as America’s main sources of employment presents a distorted portrayal of the demographics of job creators in our economy.
California is a small business economy. 99.2% of the state’s employers and 51% of the private sector workforce owe their livelihoods to small businesses, per The U.S. Small Business Administration (SBA). Thus, when looking for jobs during California’s economic recovery, look no further than small businesses for hiring. [For more information on California’s small business statistics, see SBA’s Small Business Profile.]
Smaller companies are more stable than large corporations in good times and bad times. As a result, California’s recovery will be more prolonged than states home to an abundance of big corporations and commodity production. Company-owned towns we do not understand, for good reason.
Although smaller companies shed workers less quickly during recessions, these businesses are unable to hire as rapidly as major corporations during expansive economic booms. Thus, it is important for California to foster business-friendly environments, such as California’s implementation of low taxes on travelers. [For more information on how low travel taxes result in increased demand and subsequent job creation, see the August 2011 first tuesday article, Dear travelers, California businesses want you!]
The findings regarding the increase of Hispanic-owned businesses support first tueday’s long-time stance on permissive immigration policies. Entrepreneurial by culture, the Latino community is bolstering business creation and development. Subsequently, the rate of employment among U.S.-born workers will increase, with very little overlap between jobs filled by U.S.-born workers and immigrant laborers.
California can only benefit from an increase in the number of small businesses created, especially throughout the extensive variety of cultural enclaves the state has to offer. Marketing to all types of potential clients is essential, and job growth in the private sector will result. [For more information on the significance of immigration upon real estate, see January 2011 first tuesday article, Immigration’s impact on the housing market.]
Ultimately, stability in the California housing market depends on the stability of the job market, which will not come from the volatility, financial speculation and 100% absentee ownership inherent to big businesses, but rather from small locally owned businesses, which are by definition grounded in economic fundamentals.
So look up, Californians: a long but mostly stable recovery road is ahead. Real estate market dynamics are driven by jobs, and job seekers can keep looking towards small business and the 99% for employment opportunities, not just the industry giants.
Re: “Job Creators: It’s Not Just The 1%” from The Huffington Post