What really drives the U.S. economy? Small business—firms with fewer than 500 employees—drives the U.S. economy. Small U.S. firms pay about 44 percent of the total U.S. private sector payroll, which, according to the most recent data available, accounted for approximately $2.1 trillion of the total (non-farm) private sector payroll of $4.8 trillion. Small businesses with fewer than twenty employees increased employment by 853,074 during 2001-2002. They also represent 99.7 percent of all firms, they create more than half of the private non-farm gross domestic product, and they create 60 to 80 percent of the net new jobs. In 2004, there were an estimated 23,974,500 businesses in the U.S. Of the 5,683,700 firms with employees, 5,666,600 were small firms.
The data also shows that in 2002:
•Women owned 6,492,795 firms;
•Blacks owned 1,197,988 firms;
•Hispanics owned 1,574,159 firms;
•Asians owned 1,105,329 firms; and
•American Indians and Alaskan Natives owned 206,125 firms. In 2004, there was strong growth of 7.3 percent in proprietor’s income—a partial measure of small business income. Business bankruptcies decreased by 2.1 percent and self-employment increased by 2.2 percent. This and other data for each state and territory are available in individual economic profiles on the Office of Advocacy website at http://www.sba.gov/advo/research/profiles. The office of Advocacy, the “small business watchdog” of the government, examines the role and statues of small business in the economy and independently represents the views of small business to federal agencies, Congress, and the President. It is the source for small business statistics presented in user-friendly formats and it funds research into small business issues. Small businesses are also fueling today’s innovation because small businesses are more likely to develop more ground breaking ideas. They produce 13 to 14 times more patents per...