Historically, the main driving force of the US economy has been the goods-producing sector with manufacturing (mainly automotive) and construction (mainly housing) being the “big dogs”. These big dogs have huge tails that influence many other industries in their direct and indirect supply chains during both upward and downward economic trends. Consequently, most decision-makers focus on these big dogs as opposed to their purported tails—small business. From a Jobenomics perspective, small business has evolved to become the new big dog and will remain so, at least for the remainder of this decade.
Over the last thirty years, goods-producing industries have declined 25%, where service-providing industries, mainly small business, have increased 81% (see Jobenomics blog entitled, 30-Year US Employment Trends). Today, according to the US Bureau of Labor Statistics, US manufacturing employs 11.8 million and construction 5.5 million, which is 3.8% and 1.8% of the US population (312 million). On the other hand, service-providing industries employ 91.6 million or 29.4% of the US population. Of this 91.6 million, 77.4 million or 85% are small businesses of which 55% (42.9 million) are very small businesses with less than 50 employees (source: ADP). Based on these numbers, very small business is the big dog now.
The question for policy-makers, decision-leaders, talking-heads and all-Americans is whether this new big dog can survive without the former big dogs. The answer is probably not. However, the question should not be an either/or question. America needs all its dogs in the economic fight. Americans need to focus on small business as the new economic champion giving old dogs time to heal, grow and effectively compete again.
The biggest reason that small business can compete globally is largely due to technology. Small information, technical, financial, professional and trade service firms can now compete globally due to broadband communication and advanced information technology systems. Collectively, little has become big. 77.4 million service-providing, small business employees make it so.