It’s “Startup Day”: The U.S. Needs More Entrepreneurs…SBE Council Report Points to Millions of Missing Businesses

By SBE Council at 4 August, 2016, 12:31 pm

FOR IMMEDIATE RELEASE

The latest SBE Council report – Gap Analysis #3: Millions of Missing Businesses – is the third in a seven-part series highlighting key gaps in the U.S. economy.

Washington, D.C. – On this National Startup Day Across America, the Small Business & Entrepreneurship Council (SBE Council) released its third “Gap Analysis” report, which points to an estimated gap or shortfall of between 867,000 and 4.8 million businesses in the U.S. economy.

The report – Gap Analysis #3 – Entrepreneurship in Decline: Millions of Missing Businesses – looks at how various measures of entrepreneurship and business activity show a decline in entrepreneurship and startup activity over at least the past eight or so years. (For a pdf copy of the report click here.)

SBE Council chief economist Raymond J. Keating explained, “If we look at incorporated and unincorporated self-employed, and employer firms as shares of the relevant population, we see a significant gap in the number of businesses compared to where we should be. Indeed, these numbers point to some 3.7 million missing businesses in the U.S. in 2015.”

UPDATE (October 2016):

A Full Look at “GAPS” in the U.S. Economy – SBE Council has released the following reports in addition to “Millions of Missing Businesses”:

The first analysis – Gap Analysis #1: The GDP Shortfall – estimated a GDP shortfall of $2.7 trillion (in 2009 dollars) in 2016 thanks to real GDP growth running at less than half the rate it should during a recovery/expansion period.

The second report – Gap Analysis #2: Lost Decade of Private Investment reported a historic gap or shortfall in private-sector investment over the most recent decade, for example, with real fixed nonresidential investment (or business investment) coming up $1.1 trillion (in 2009 dollars) short of where it should be in 2016.

Gap Analysis #3 – Entrepreneurship in Decline: Millions of Missing Businesses points to an estimated gap or shortfall of between 867,000 and 4.8 million businesses in the U.S. economy.

“Gap Analysis #4 – The Productivity Shortfall: Causes and Results” reveals the dramatic slowdown in productivity growth in recent years, with annual labor productivity growth averaging a woeful 0.4 percent from 2011 to 2016, compared to average annual growth of 2.0 percent from 1956 to 2016.

“Gap Analysis #5: Americans’ Lost Income” reported that if per capita real personal disposable income grew at the average historic rate since 2009, real per capita personal disposable income in 2015 would have been $2,000 higher (2009 dollars) on average for individuals, and $8,000 higher for an average family of four.

Gap Analysis #6: America’s Lost Jobs shows the dramatic shortfalls in the U.S. labor force and job creation. All told, if the U.S. had a reasonable level of employment relative to population, such as the level existing before this last recession, there would have been 8.1 million more people employed and 7.8 million more workers in the U.S. labor force in September 2016.

Keating added, “Looking at IRS data that offers the broadest measure of businesses in the U.S., if the previous growth in the business share of the relevant population had continued after 2008, the number of missing businesses in 2015 rises to 4.8 million.”

Noting that this is National Startup Day, Keating also observed, “If the recent pre-recession percentage high as a share of the relevant population had prevailed in 2015, there would have been approximately 106,000 more startups than there were in that year.”

In the report, Keating summed up, “Starting up, building and operating businesses are central to a nation’s economic well-being. After all, entrepreneurship is the source of innovation, economic growth, wage growth and job creation, today and in the future.”

SBE Council president & CEO Karen Kerrigan added, “As members of Congress celebrate Startup Day across their districts and states today, we hope they bring that spirit and energy back to Washington to advance policies that will encourage more entrepreneurship and small business growth. This would include policies that will improve capital access, and a tax and regulatory system that is less burdensome, costly and complex for small businesses.”

The results in this third SBE Council “Gap Analysis” line up with the findings in the first two reports. The first analysis – Gap Analysis #1: The GDP Shortfall – estimated a GDP shortfall of $2.7 trillion (in 2009 dollars) in 2016 due to real GDP growth running at less than half the rate it should during a recovery/expansion period. The second report – Gap Analysis #2: Lost Decade of Private Investment – revealed a historic gap or shortfall in private-sector investment over the most recent decade, for example, with real fixed nonresidential investment (or business investment) coming up $1.1 trillion (in 2009 dollars) short of where it should be in 2016.

This third SBE Council “Gap Analysis” is scheduled to be followed by reports on productivity, income, jobs, and trade, with a final report highlighting the basic policy changes needed to close these gaps.

CONTACT:  Raymond J. Keating, Chief Economist

631-909-1122

703-242-5840

rkeating@sbecouncil.org 

SBE Council is a nonpartisan, nonprofit advocacy, research and education organization that works to protect small business and promote entrepreneurship. For nearly 25 years, SBE Council has advanced key policies and initiatives to strengthen the ecosystem for startups and small business success. To learn more, visit SBE Council’s website: www.sbecouncil.org. Follow on Twitter: @SBECouncil.

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