Small Business: The Barometer of the Economy

It is no secret that small business can have a huge impact on the economy. When retail giants are slow to change and slow to show change, small businesses are great mirrors to reflect both the health of the economy and the current trends. Taxes and labor quality are cited as the two top problems for small businesses above sales and interest rates for the first time in years. This implies that the economy is finally improving. To better understand this, we have to look into how a small business can affect the economy.

A small business is defined by having 500 or less employees. Today, small businesses make up 97% of all business in the US, so it is obvious how they can have such a huge collective effect on the economy. First and foremost, small businesses provide jobs—about 64% of all new jobs are created by small businesses. The more people who are earning an income, the more disposable income is spent. Second, small businesses help keep large companies going. This might not seem like an obvious correlation at first, but in many cases, it is the small businesses that provide services for large business that they cannot do themselves. Think cleaning services, maintenance, and other outsourced services that are not indicative of the big box company.

When we think about the ways that small businesses have the power to affect the economy and we consider the survey where taxes and good labor show an increase in the country’s economy, we can conclude that the better small businesses are doing, the better the economy. The more revenue a small business makes, the more taxes they have to pay. These include local taxes, which help out the economy by stimulating growth in an area such as improving public services. As small businesses grow, as the economy improves, more help is needed. The fact that good labor is hard to come by means two things: the first is that here are more jobs than workers and the second is that businesses are growing and thus making new jobs.

Let us hope that the health of small business in general keeps up. In the future, we should remember to look at how local businesses are fairing, because a healthy economy is not made up of a few giants, it needs the medium and the little guys too. Just like how researches judge the health of the rainforests not my the size of the biggest tress, but by the health of the soil quality on the forest floor, we need to keep an eye on not only on the big box companies, but also on the little mom and pop shops too.