Of all the new jobs, only 2% are created by recruited companies

A dominant theme in local coffee shop news tends to be how “bad” big business is and how many employees “they” have added or taken away. Many people think this country is run by “big business,” but actually, our country is really run and dominated by small- and medium-sized businesses.

Ninety-eight percent of your community’s new jobs in the U.S. are created by new business start-ups and the existing businesses you see on your Main Street, home- based businesses that are already a part of your town’s hidden economy, and all the existing businesses you count on to meet your daily needs. Only 2% of all new jobs are created by companies recruited to your community. So why do we spend so many tax dollars to steal companies from one town to another or one state to another?

From his book, The Coming Jobs War, Jim Clifton, chairman of Gallup, says, “as of 2007, there were about six million businesses in the United States with at least one employee; businesses with 500 or fewer employees represent more than 99% of these six million. There are slightly more than 88,000 companies with 100 to 500 employees and about 18,000 with 500 to 10,000 workers – and only about 1,000 companies with more than 10,000 employees.”

My math tells me, then, the U.S. has only 107,000 companies of six million that have more than 100 employees. That leaves 5,893,000 businesses with fewer than 100 employees. These stats show how our Main Streets become colorful with services and businesses we need!

For 28 years, I have been working with communities on many different levels, much of that time in very rural areas. I've watched communities spend many thousands of dollars to “steal” companies from other towns, thus creating a neutral net gain of jobs in the economy. Many of those companies, after they have used up their tax advantages from relocating, will look elsewhere to gain more tax advantages and their loyalty to that community ends as soon as they receive a better deal.

According to Clifton, “the United States has successfully invented and commercialized between 30% and 40% of all breakthroughs worldwide, throughout virtually all categories, in the last 200+ years.” That is a startling statistic when you really think about what that means: we have a culture of creativity and invention. 

It appears to me that we have been losing that part of our creative business cycle. Many community businesses are third-generation owners, passed down in families, leading to many of our communities and leaders losing their entrepreneurial culture, innovation, and drive

Entrepreneurs are the bridge to the innovations and those customers that will use the products. The business model is everything! You can have all the inventions and innovative products in the world, but without the business model the entrepreneur creates to bring a product to market, new inventions and innovations sit on the shelf.

What's happening in your town to foster new ideas that can make your Main Street and local economy brighter? What role are you playing to encourage and support opportunities?

To lean more on how to spend efficient tax dollars and create wealth for your community, contact Global Horizons now.