We hear that small businesses are the key to resuming jobs growth, small businesses won’t hire because of uncertainty in tax rates and regulations, and the economy is built off small businesses. In sum, if we get small businesses back on their feet, America can recover.
It sounds good, but don’t we have to get our major industries competitive, growing, and willing to hire again before most small businesses can see improvements to their bottom lines?
The overwhelming majority of small businesses in this country are mom-and-pop stores, service trades (plumbers, electricians, contractors), and professional firms (lawyers, accountants, brokers). The garage-based entrepreneurial start ups like Microsoft that turn into big companies —are more like one in a million.
Your typical small business depends on the vitality of the country’s larger employers. If the big companies are hiring and increasing wages then their employees have money to spend on homes, getting new cars at the local dealership, eating at restaurants, going on trips and staying at hotels and motels, needing attorneys and brokers to help them with transactions and invest their money---and on and on. When the big companies start spending they hire more vendors and sub contractors, do more events, expand travel and entertainment budgets. It’s the big company spending, which ignites activity across the small business sector.
But the problem is big multinational companies not only don’t expand in the U.S., they continue to transfer jobs offshore to cheaper employment markets. This job drain now extends to the high tech sector as The New York Times reported earlier this week. Yes, high tech jobs, the ones we’re counting on for future growth, head out of the U.S. because we are the high cost global employment market. Companies interested in creating shareholder value have no incentive to pay higher wages to Americans, and they don’t need to with ample pools of smart overseas workers at their disposal.
So our unemployment rate is uncomfortably high and many folks who land new jobs now make less than they used to. Know anyone like that? I bet you do. And as a result, workers find they have less take home pay to spend on small businesses.
So the local restaurant doesn’t need as many waiters and the car dealer needs fewer salesmen. The motel owner has to lay off maids and the contractor has fewer jobs. With less trickle-down from the big companies, small businesses are hamstrung. And now state and local governments initiate major layoffs, because tax revenues are down (even after 10 years of low federal tax rates, which were supposed to spur growth). Shrinking government means more unemployed too.
The small business canard is a useful tool for the U.S. Chamber of Commerce and its political allies to create a smokescreen that hides what’s going on. Our big companies, who are the Chamber’s big donors, can make more money by hiring fewer people here. CEOs and senior management teams continue to take home record compensations by finding these “productivity” enhancements, and they look to blunt any attempts to increase taxes on their overseas operations so they can keep creating this shareholder value. And they want to make sure taxes on their seven figure pay packages aren’t increased—don’t let any of the Bush tax cuts expire. Of course, that’s because of the impact on small businesses.
Yeah right. And you wonder why your office building leaks tenants and rents head south.
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Jonathan D. Miller
A marketing communication strategist who turned to real estate analysis, Jonathan D. Miller is a foremost interpreter of 21st citistate futures – cities and suburbs alike – seen through the lens of lifestyles and market realities. For more than 20 years (1992-2013), Miller authored Emerging Trends in Real Estate, the leading commercial real estate industry outlook report, published annually by PricewaterhouseCoopers and the Urban Land Institute (ULI). He has lectures frequently on trends in real estate, including the future of America's major 24-hour urban centers and sprawling suburbs. He also has been author of ULI’s annual forecasts on infrastructure and its What’s Next? series of forecasts. On a weekly basis, he writes the Trendczar blog for GlobeStreet.com, the real estate news website. Outside his published forecasting work, Miller is a prominent communications/institutional investor-marketing strategist and partner in Miller Ryan LLC, helping corporate clients develop and execute branding and communications programs. He led the re-branding of GMAC Commercial Mortgage to Capmark Financial Group Inc. and he was part of the management team that helped build Equitable Real Estate Investment Management, Inc. (subsequently Lend Lease Real Estate Investments, Inc.) into the leading real estate advisor to pension funds and other real institutional investors. He joined the Equitable Life Assurance Society of the U.S. in 1981, moving to Equitable Real Estate in 1984 as head of Corporate/Marketing Communications. In the 1980's he managed relations for several of the country's most prominent real estate developments including New York's Trump Tower and the Equitable Center. Earlier in his career, Miller was a reporter for Gannett Newspapers. He is a member of the Citistates Group and a board member of NYC Outward Bound Schools and the Center for Employment Opportunities.
