Written by Janis Bowdler and Kim Zeuli
Originally published by Governing on November 8, 2016.
Small businesses are the backbone of urban economies: They play a critical role in creating jobs for local residents. Yet too often city leaders and economic developers are not prioritizing small businesses when allocating resources to drive growth, focusing their strategies instead on the attraction and retention of large businesses.
A new report by the Initiative for a Competitive Inner City may make public officials consider shifting these priorities. The report provides compelling evidence that small businesses rival, and often exceed, the impact of large businesses when it comes to job creation.
The research, conducted with the support of JPMorgan Chase, was released on the heels of the bank’s announcement that it was committing an additional $75 million to its Small Business Forward initiative, recognizing the contribution of small businesses to economic opportunity and reducing unemployment, especially for women, minorities and veterans.
ICIC’s report measures the current state of small business jobs in five cities: Chicago, Dallas, Detroit, Los Angeles, and Washington, D.C., and identifies key findings regarding small businesses and urban job growth.
In all five cities, the distribution of small businesses and large businesses is similar, with small businesses — those with 250 employees or fewer — representing at least 99 percent of all businesses in the city. Despite this parallel, small-business job creation varies across the cities ICIC studied, ranging from 48 percent in Dallas to 74 percent in Los Angeles.
Despite the big impact small businesses can have on job creation, small-business support in most cities is an uncoordinated set of programs that focus only on the business owner’s education rather than on the larger business environment. City leaders will need to leverage new tools to maximize small-business job creation in their cities. ICIC offers five critical strategies:
Big tax-revenue gains and economy of scale continue to shape how many economic-development professionals think about job creation. Yet ICIC’s report makes a strong case for city leaders to support the growth of small businesses with the same resources and intentionality as they do with their efforts to attract and retain large businesses.