Small business suffers as global biz booms

One statistic in an Associated Press story helps explain why the U.S. economy lolls in the doldrums: wages and benefits have sunk to 57.5 percent of GDP, down from a longstanding 64 percent while “a big chunk of the economy’s gains has gone to investors in the form of higher corporate profits.”

“Corporation” is a loaded word. It describes the increasingly rare private practice physician who attempts to shield his or her home from loss in the event of malpractice lawsuit or the auto dealers who are the big wheels in local chambers of commerce.

But these are not the business owners described in the AP statistic. As big as they may seem to the ordinary wage earner, these local economic leaders are small fries in the greater scheme of things.

Here’s another fact to put things in perspective. The Small Business Administration tells us that the firms in its universe comprise 99.7 percent of all employers. Taken as a whole, small businesses employ just over half of all U.S. private sector workers and have created nearly two-thirds of all the new jobs over the last 15 years.

But think about the flip side. A handful of huge companies — comprising just 0.3 percent of all U.S. firms — employ the other half of the workforce. Moreover these global players and household brands also pay the best wages and benefits.  As the SBA reports, the small firms noted above employ just over half of all workers but pay just 44 percent of private sector wages.

Global companies are booming because they can shift their focus more easily to the booming parts of the world, like China, and/or take advantage of low cost labor, materials and manufacturing. They also have such a huge impact that their lobbyists can pressure Congress for all sorts of help.  No wonder their profits soar and their investors and employees do well.

Meanwhile the Main Street economy, thousands upon thousands of small employers and millions upon millions workers, continues to suffer. Most local businesses serve only local markets. Many of their customers cannot escape the incredible downward wage pressure captured in the AP statistic.

Remember that small firms have been the engine of job creation. Main Street is hurtin’ for certain. And as long as it is, the job market will remain stalled, no matter how well global companies perform.

About Tom Abate

Tom Abate is a former small-press publisher, businessman and newspaper reporter who lives in the San Francisco Bay Area. A Brooklyn native and U.S. Navy veteran, Tom is a UC Berkeley graduate who earned his master’s degree in journalism from Columbia University. During his career he has worked in public relations, graphic design, typography and business journalism. As a journalist he specialized in science, technology, biotechnology, economics and the business culture of Silicon Valley. He has taught writing through UC Extension and was briefly a junior college instructor. He can work with spreadsheets, presentation software and some multimedia tools. In addition to his paid work, he wrote a blog (MiniMediaGuy.org, 2005-2010) that explored the business models, techniques and practical concerns of new and independent media. He is on the advisory board of the Society for New Communications Research (SNCR.org). The father of three children, Tom loves to garden and build things. His intellectual passions include political theory, globalism and the struggle of the individual against bureaucracy.
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One Response to Small business suffers as global biz booms

  1. Tim Holmes says:

    The flipside perspective of what I’ve said about local small businesses vs. chains.

    When the going gets tough the chains leave town while the local businesses have no choice but to buckle down, suck it up, and either wait until things change and hold on as long as possible, or innovate, spend, or market your way out. Either route is better for the local economy, the health of a city itself, than the holes left around town by departing chains.

    These are depressing visual reminders of the failure of the life of cheap calories and excess consumption and the low quality, short term production that makes up virtually all of chain retail, which has played a direct role in our country’s current financial decline.

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