How Many Jobs do Small Businesses Create?

According to the Small Business and Entrepreneurship Council, only 20,868 of the approximately 32.6 million businesses in the U.S. have 500 or more employees, meaning America’s economy runs on small businesses, which employ 46.4% of private-sector employees.

While small businesses employ a little less than half of private sector employees, that does not indicate how many jobs they actually create. It was once believed that small businesses accounted for over 80% of new jobs, but recent studies have found that estimation inaccurate; however, they still account for a significant portion of new jobs.

So, how many jobs do small businesses create?

Small Business Job Creation

The Small Business Administration found that between March 2021 and March 2022, small businesses added 17.9 million jobs through opening and expanding US establishments. However, closing and contracting establishments lost 11 million jobs.

• Therefore, between March 2021 and March 2022, small businesses added a net increase of 7 million jobs.
• In fact, over the past 25 years, small businesses have created 2 out of every 3 jobs.

The SBA’s Office of Advocacy states that from 1995 to 2021, small businesses created 17.3 million net new jobs.

• Small businesses have accounted for 62.7% of net jobs created since 1995.

While small businesses create many jobs, some studies claim that those numbers are misleading. The Congressional Research Service published a report in 2022 exploring the Small Business Administration and job creation. In this report, the authors raise the point that small business job creation varies across different time periods.

The report also states that startups, which they define as businesses that have been in operation for less than a year, contribute the majority of new jobs. However, startups tend to destroy as many jobs as they create.

• The report states that about 20% of all startups close in their first year.
• One-third close within two years.
• Fewer than half of all startups remain in business after five years.

As such, while startups have an initial strong positive effect on job creation the year they form, this effect decreases over time and is negligible after six years.

This suggests that it is new and young businesses, not strictly small businesses, contribute most of the new jobs. Once a small business crests its fifth year, job creation slows.

• In fact, the report found that businesses operating for at least six years but less than 28 years created relatively little net jobs.

Job creation picks up for businesses over 28 years, meaning that the age of the business is a more important factor in job creation than its size.

Do small businesses create more jobs?

Do small or large businesses create more jobs? The Congressional Research Service’s 2022 report claims that young firms, those within their first two years of existence, have higher job creation and destruction rates than older firms.

Additionally, the Small Business Administration’s Office of Advocacy states that:

• Large businesses generated 6.7 million net new jobs over the past 25 years.
• Small businesses generated 12.9 million net new jobs over the same period.
• This means that small businesses account for 66% of employment growth over the last 25 years.

This data shows that small businesses create more jobs than large businesses. However, the SBA also shows that larger establishments lost fewer jobs during the COVID-19 pandemic.

• Small business employment declined by 9.1 million during the first two quarters of 2020.
• Large business employment fell by 6.8 million during the first two quarters of 2020.

Conversely, small businesses created more jobs in the four quarters following the recession.

• 5.5 million jobs were created by small businesses during that time, offsetting 60% of the decline during the first two quarters of 2020.
• In the second quarter of 2021, small business employment grew by 939,000.
• Large business employment grew by 3.1 million during that time, offsetting 46% of the decline.

Based on the data, it is reasonable to conclude that small businesses create more jobs than large companies.

Small business job creation by industry

Based on the most recent data from the United States Census Bureau, 14,640,627 jobs were created by small businesses (all sectors and ages) in 2021 due to expanding and opening establishments.

However, within that year, more jobs were lost than created by small businesses. The data shows that -5,921,930 net jobs were created in 2021. This number factors in new and lost jobs across all industries from businesses of all ages.

This trend continues when we look at each industry. The majority of small business net job creation is negative. The main exception is businesses that have been in operation for less than a year since they haven’t been in operation long enough to lose jobs.

However, all small businesses within the finance and insurance industry created a positive net number of jobs, at 51,126 in 2021, the most recent year for which data is available.

Agriculture, forestry, fishing and hunting

Businesses of all ages (2021).

• Jobs created: 24,689
• Net jobs created: -2,666

Businesses in operation for less than a year.

• Jobs created: 7,338
• Net jobs created: 7,338

Businesses in operation for five years.

• Jobs created: 1,400
• Net jobs created: 533

Mining, quarrying, and oil and gas extraction

Businesses of all ages (2021).

• Jobs created: 42,029
• Net jobs created: -99,035

Businesses in operation for less than a year.

• Jobs created: 12,394
• Net jobs created: 12,394

Businesses in operation for five years.

• Jobs created: 1,300
• Net jobs created: -4,646

Utilities

Businesses of all ages (2021).

• Jobs created: 42,293
• Net jobs created: -2,580

Businesses in operation for less than a year.

• Jobs created: 10,853
• Net jobs created: 10,853

Businesses in operation for five years.

• Jobs created: 733
• Net jobs created: -287

Construction

Businesses of all ages (2021).

• Jobs created: 1,014,307
• Net jobs created: -117,850

Businesses in operation for less than a year.

• Jobs created: 223,515
• Net jobs created: 223,515

Businesses in operation for five years.

• Jobs created: 36,530
• Net jobs created: -8,002

Manufacturing

Businesses of all ages (2021).

• Jobs created: 986,081
• Net jobs created: -297,674

Businesses in operation for less than a year.

• Jobs created: 183,443
• Net jobs created: 183,443

Businesses in operation for five years.

• Jobs created: 22,614
• Net jobs created: -5,356

Wholesale trade

Businesses of all ages (2021).

• Jobs created: 569,162
• Net jobs created: -236,202

Businesses in operation for less than a year.

• Jobs created: 131,081
• Net jobs created: 131,081

Businesses in operation for five years.

• Jobs created: 15,052
• Net jobs created: -8,079

Retail trade

Businesses of all ages (2021).

• Jobs created: 1,547,652
• Net jobs created: -290,127

Businesses in operation for less than a year.

• Jobs created: 394,891
• Net jobs created: 394,891

Businesses in operation for five years.

• Jobs created: 51,520
• Net jobs created: -13,073

Transportation and warehousing

Businesses of all ages (2021).

• Jobs created: 778,803
• Net jobs created: -13,073

Businesses in operation for less than a year.

• Jobs created: 289,910
• Net jobs created: 289,910

Businesses in operation for five years.

• Jobs created: 29,522
• Net jobs created: -4,860

Information

Businesses of all ages (2021).

• Jobs created: 451,132
• Net jobs created: -164,082

Businesses in operation for less than a year.

• Jobs created: 121,354
• Net jobs created: 121,354

Businesses in operation for five years.

• Jobs created: 14,835
• Net jobs created: -14,947

Finance and insurance

Businesses of all ages (2021).

• Jobs created: 883,413
• Net jobs created: 51,126

Businesses in operation for less than a year.

• Jobs created: 248,322
• Net jobs created: 248,322

Businesses in operation for five years.

• Jobs created: 28,382
• Net jobs created: -1,996

Real estate and rental and leasing

Businesses of all ages (2021).

• Jobs created: 318,861
• Net jobs created: -105,445

Businesses in operation for less than a year.

• Jobs created: 124,111
• Net jobs created: 124,111

Businesses in operation for five years.

• Jobs created: 14,469
• Net jobs created: -8,855

Professional, scientific, and technical services

Businesses of all ages (2021).

• Jobs created: 1,341,408
• Net jobs created: -1,769

Businesses in operation for less than a year.

• Jobs created: 361,194
• Net jobs created: 361,194

Businesses in operation for five years.

• Jobs created: 55,108
• Net jobs created: -10,220

Management of companies and enterprises

Businesses of all ages (2021).

• Jobs created: 448,780
• Net jobs created: -95,961

Businesses in operation for less than a year.

• Jobs created: 86,542
• Net jobs created: 86,542

Businesses in operation for five years.

• Jobs created: 9,217
• Net jobs created: -8,566

Administrative and support and waste management and remediation services

Businesses of all ages (2021).

• Jobs created: 1,782,770
• Net jobs created: -241,558

Businesses in operation for less than a year.

• Jobs created: 455,227
• Net jobs created: 455,227

Businesses in operation for five years.

• Jobs created: 77,750
• Net jobs created: -12,785

Educational services

Businesses of all ages (2021).

• Jobs created: 218,239
• Net jobs created: -327,131

Businesses in operation for less than a year.

• Jobs created: 54,456
• Net jobs created: 54,456

Businesses in operation for five years.

• Jobs created: 9,037
• Net jobs created: -8,651

Health care and social assistance

Businesses of all ages (2021).

• Jobs created: 1,962,764
• Net jobs created: -559,916

Businesses in operation for less than a year.

• Jobs created: 598,951
• Net jobs created: 598,951

Businesses in operation for five years.

• Jobs created: 70,057
• Net jobs created: -20,693

Arts, entertainment, and recreation

Businesses of all ages (2021).

• Jobs created: 191,901
• Net jobs created: -650,602

Businesses in operation for less than a year.

• Jobs created: 65,611
• Net jobs created: 65,611

Businesses in operation for five years.

• Jobs created: 5,043
• Net jobs created: -26,456

Accommodation and food services

Businesses of all ages (2021).

• Jobs created: 1,485,071
• Net jobs created: -2,267,592

Businesses in operation for less than a year.

• Jobs created: 644,041
• Net jobs created: 644,041

Businesses in operation for five years.

• Jobs created: 46,986
• Net jobs created: -156,910

Other services (except public administration)

Businesses of all ages (2021).

• Jobs created: 553,244
• Net jobs created: -505,851

Businesses in operation for less than a year.

• Jobs created: 172,307
• Net jobs created: 172,307

Businesses in operation for five years.

• Jobs created: 16,491
• Net jobs created: -22,525

The Bottom Line

Overall, small businesses have accounted for 62.7% of net jobs since 1995. They are the lifeblood of the American economy, employing 46.4% of private-sector employees. While they do not create as many new jobs as once thought, they still account for a significant portion. In fact, the SBA states that over the past 25 years, small businesses have created two out of every three jobs.

With small businesses and independent retailers having such a significant impact on the American economy and job market, it is more important than ever to support our small and local businesses.