Report: Small Businesses Fuel U.S. Economy through Jobs and Competition

U.S. Small Business Administration Office of Advocacy data show contribution of small businesses to gross domestic product.

2/1/2019 8:00 AM

Report: Small Businesses Fuel U.S. Economy through Jobs and Competition

Small businesses are a significant part of the U.S. economy, particularly through providing jobs and pushing innovation and competition, according to a new report from the U.S. Small Business Administration (SBA) Office of Advocacy.

Small businesses make up a significant part of the accounts receivable management industry and ACA International’s membership.

In a white paper titled “Small Businesses in the Collection Industry in 2018,” ACA International’s research shows that the vast majority (87 percent) of its third-party debt collection member companies are small businesses that largely serve other small businesses. In fact, 44 percent of ACA member organizations have fewer than nine employees while 93 percent have 99 or fewer employees. While ACA International is the largest membership organization in the accounts receivable management industry, less than 1 percent of its membership has more than 500 employees.

Overall, small businesses create two-thirds of net new jobs and account for 44 percent of U.S. economic activity, according to a news release on the SBA report. The overall contribution has declined gradually over the years tracked in the report, 1998 to 2014; only impacted in part by the recession in 2008.

The small business share of the gross domestic product declined more than 3.3 percent during the eight years preceding the recession and only 1.2 percent in the eight years during and after the recession, according to the SBA.

“Across the 16 years from 1998 to 2014, the small business share of gross domestic product has fallen from 48 percent to 43.5 percent. Over the same period, the amount of small business gross domestic product has grown by about 25 percent in real terms, or 1.4 percent annually. However, real gross domestic product for large businesses has grown faster, at 2.5 percent annually,” it reports in the news release.

 “This useful benchmark shows us that small businesses continue to be big contributors to the U.S. economy,” Acting Chief Counsel for Advocacy Major L. Clark said in the news release. “While their contribution has grown at a slower rate than that of large businesses, small businesses continue to be at the forefront of driving innovation, jobs and economic growth.”

Nominal small business gross domestic product measured $5.9 trillion in 2014, the most recent year for which small business gross domestic product data are available.

Structural changes for businesses, rather than cyclical responses, may also have contributed to the decline in small businesses in the gross domestic product, according to the SBA.

Structural changes include:

  • Long run declines in business dynamism;
  • The rise of big-box stores;
  • The changing regulatory environment;
  • The changing industry composition;
  • Differential effects of recessions according to business age;
  •  The critical role of credit for small businesses; and
  • The faster growth of large businesses.

View a summary of the research here as well as the complete report:Small Business GDP, 1998-2014.”

Read more from ACA’s Small Businesses in the Collection Industry in 2018 white paper on our research webpage.

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