Small Business Ownership In America Is At An All-Time Low

Tyler Durden's picture

Submitted by Michael Snyder via The Economic Collapse blog,

According to the Federal Reserve, the percentage of American families that own a small business is at the lowest level that has ever been recorded.  In a report that was just released entitled "Changes in U.S. Family Finances from 2010 to 2013: Evidence from the Survey of Consumer Finances", the Federal Reserve revealed that small business ownership in America "fell substantially" between 2010 and 2013.  Even in the midst of this so-called "economic recovery", small business ownership in America has now fallen to an all-time low.  If the economy truly was healthy, this would not be happening.  And it isn't as if Americans are flooding the labor market either.  As I detailed yesterday, the labor force participation rate in this country is at a 36 year low.  That would not be happening if the economy was actually healthy either.  The truth is that the middle class in America is dying, and this new report from the Federal Reserve is more evidence of this very harsh reality.

In order to build wealth, middle class Americans either need to have their own businesses or they need good jobs.  Sadly, the percentage of Americans that own a business continues to decline steadily.  In the report that I mentioned above, the Federal Reserve says that the proportion of U.S. families that have an ownership interest in a small business fell from 13.3 percent in 2010 to a brand new all-time low of 11.7 percent in 2013.

This is one of the factors that is increasing the gap between the extremely wealthy and the rest of us in this country.  And of course another of the major factors is the steady decline in good paying jobs.

The U.S. Competitiveness Project at Harvard Business School is chaired by professors Michael E. Porter and Jan W. Rivkin.  It just released a new report entitled "An Economy Doing Half Its Job", and it addressed the fact that the middle class is deeply struggling even though many large U.S. corporations have been thriving.  The following is an excerpt from an article in the Boston Globe about this report...

In a statement, Porter added: “Shortsighted executives may be satisfied with an American economy where firms operating here are winning without lifting US living standards. But leaders with longer perspectives understand that companies can’t thrive for long while their workers and their communities struggle.”

Unfortunately, this is not likely to change any time soon.  In fact, that same report discovered that Harvard Business School alumni foresee "falling pay and fewer openings for full-time jobs" for American workers in the years ahead...

U.S. workers face a dim future, with stagnant or falling pay and fewer openings for full-time jobs.

 

That's the picture that emerges from a survey of Harvard Business School alumni.

 

More than 40 percent of the respondents foresee lower pay and benefits for workers. Roughly half favor outsourcing work over hiring staffers. A growing share prefer part-time employees. Nearly half would rather invest in new technology than hire or retain workers.

The Obama administration continues to tell us that the unemployment rate is "going down" and that the economy is recovering, but that does not match the reality of what most Americans are experiencing on a day to day basis.

As David Stockman recently so aptly put it, outside of health and education the U.S. economy has not produced a single job since mid-2000 even though our population has grown greatly since that time...

In a few deft seconds, a “no jobs” nobody who apparently doesn’t actually have one himself,  essentially explained the contents of the chart below to his silenced CNBC hosts. Over the course of 170 “jobs Fridays” since mid-2000, the latter have apparently never noticed the single most stunning fact embedded in the monthly BLS report. Namely, that outside of health and education there has not been one net new job created in the American economy since July 2000! Yes, not a single new job—as in none, nein, nichts, nada, zip!

In addition, most of the new jobs that are being "added to the economy" each month are part-time jobs.  Right now, we still have 1.4 million fewer full-time jobs than we did in 2008 even though more than 100,000 people are added to the population each month.

What this means is that the middle class is shrinking.

We are witnessing an increasing concentration of wealth among the ultra-wealthy, and most of the rest of us are getting poorer.  As a recent CNN article detailed, the Federal Reserve has also discovered that the gap between the rich and the poor in America is larger than the Fed has ever recorded before...

In its Study of Consumer Finances, released every three years, the Fed found that the wealthiest 3% of American households controlled 54.4% of the nation's wealth in 2013, a slight increase from its last survey in 2010. It's also substantially higher from the 44.8% they held in 1989, showing how quickly the income divide has been growing over the past decade or so.

 

At the same time, the share of wealth held by the bottom 90% fell to 24.7% in 2013. That's compared to 33.2% in 1989.

How close does the share of wealth for the bottom 90 percent have to go before we admit that we have a major problem on our hands?

Is there anyone out there that would be okay with it hitting zero percent?

One of the big reasons why the wealthy have been doing so well is because the stock market has been soaring.  The money printing policies of the Federal Reserve have sent stock prices to unprecedented heights.  This has overwhelmingly benefited the extremely wealthy...

According to recent data from the Federal Reserve, America has the lowest level of stock ownership in 18 years. Yet stock ownership for the wealthy is at a new high—and that has accounted for most of their good fortune compared to the rest of America.

In fact, the Fed says that the wealthiest top 10 percent of all Americans now own 81 percent of all stocks...

Stock ownership is even more concentrated when it comes to share of total stock holdings. In 2010, the latest period available, the top 10 percent of Americans by net worth held 81 percent of all directly held or indirectly held stocks, according to Edward N. Wolff, an economics professor at New York University who specializes in inequality and Federal Reserve data.

 

Wolff said that share—which has not been released yet for 2013—has probably gone even higher than 81 percent since 2010.

Since the last financial crisis, the Federal Reserve has been very good to the elite.

But most of the rest of us have had a really hard time.

Until more Americans start getting good jobs and building small businesses, things are not going to turn around for the middle class.

But the policies being pursued by our politicians continue to kill good jobs and continue to kill small businesses, so I wouldn't expect significant changes any time soon.

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oudinot's picture

Without robust small businesses there will be no real growth in the economy.

TeamDepends's picture

Small business ownership does not fit into the communist game-plan. So there you have it.

SafelyGraze's picture

just outlaw them already

we don't even need a "top 500"

one corporation is sufficient

now eat your fucking vegetables

scuse me. that was profane.

 

mvsjcl's picture

A world without small businesses is a monopolist's wet dream.

wee-weed up's picture

 

 

small business ownership in America has now fallen to an all-time low.

--------

Easily explained by...

ObozoCare regulations and requirements...

Obozo Admin choking-level red-tape, taxes, and interference.

ZerOhead's picture

Not that the Fed team of Greenspan/Bernanke or Harvards Summers/Reuben had anything to do with it.

To foster some much needed growth in this valuable sector perhaps Barry can redefine 'Small Business' to include hookers, dealers and people begging at traffic stops...

Xibalba's picture

Just classify every disemployed person with an Ebay acct...wholla! 

BlindMonkey's picture

Bravo. That is some first-class, hedonic thinking there my man. What did you say your day job was again??

ss123's picture

Why own a small biz when you can start a new f'd up social networking site or sexting app with zero or negative revenue and get a $200billion evaluation over the weekend?

Skateboarder's picture

D00D, did you see that obesity chart on the other article? I'm no sure that's a good idea.

mkkby's picture

What this means is that the middle class is shrinking.

The new middle class is an EBT card, section 8 housing and obama phone.  Everybody else is either upper class or living out of a shopping cart.

NoDebt's picture

The death of small businesses, crony capitalism and excessive government regulation are all inter-related.

Try to open a small business.  Go on.  I fucking dare you.  You can't be a damned hairdresser without a degree, a cert, an all manner of health inspectors breathing down your neck.  And that's just the tip of the iceberg.

MOST careers that would typically fall under the "small business" arena require some sort of (government) licensing or certification nowadays.  And that's just for YOU.  Got employees?  You got a whole new batch of laws, regs and regulations to comply with from day one, before you've earned your first dollar.

ONLY AFTER you earn your first dollar, then you have the distinct privilege of having to deal with tax problems.

What we used to call "barriers to entry" are ridiculous in most industries these days.  WAY better to take a run at it illegally/under the table and see if you can get the business off the ground before the vultures descend on you.  If they have their way with you BEFORE you get airborne, you'll never get it off the ground.

 

ZerOhead's picture

"The death of small businesses, crony capitalism and excessive government regulation are all inter-related."

 

You hit the nail on the head with that one. If you are a big business you can afford the acountants, lawyers, consultants etc. to be able to comply with the bazillions of existing regulations on the books most of which you probably don't even know about. You can even ship all your production overseas where you don't need to comply with anything, pay the workers next to nothing, and offshore your profits to a country where you pay next to no taxes.

If you are extremely large and politically connected like BP you can even bypass ALL of the legally required paperwork and drill a cheap oil leaking shithole in the Gulf of Mexico with the full permission of the MMS while Obama's Chief of Staff lives free in a BP lobbyists "basement" apartment.

http://www.freerepublic.com/focus/f-news/2529230/posts 

And when it leaks 50,000 barrels per day the government you own will back your claim that it's only 5,000.

 

If you are a small business however you are in their crosshairs and they will ride your ass until you are dead.

It's their job.

grunk's picture

You nailed it, NoDebt.

Saw this on Drudge the other day:

More Angelenos are becoming street vendors amid weak economy

http://www.latimes.com/business/la-fi-street-vendors-20140907-story.html#page=1

 

But some kid opens a lemonade stand in front of his house and he gets a visit from the Code Protection Team.

 

Idaho potato head's picture

Well said, I remember the IRS audited my sole ownership, one man shop for 1999. The auditor told my accountant that nobody could live on that little money in Cali and added 40,000$ to my gross, thusly making me liable to an extra 21,000$ liability for that year. I asked the accountant if they could do that, he said oh yeah, he can estimate. As of this date, it has no doubt not improved since then.

TeethVillage88s's picture

Idaho potato head;

Holy f*ckin shit. I ain't naive, but damn that was witness.

Trucker Glock's picture

"WAY better to take a run at it illegally/under the table and see if you can get the business off the ground before the vultures descend on you."

The "better to ask for forgiveness" routine doesn't work anymore.  Too late to ask after the fucking SWAT team flash bangs your children to death, shoots your dog, puts boot prints on the necks of anything left living, and tears your place to pieces.  Comply, bitchez!

This country is soooooo fucked.

ajax's picture

 

 

Easier to compose a 5 part fugue for piano than to start a small  business and succeed ...

TeethVillage88s's picture

NoDebt:

You are the real thing.

"The death of small businesses, crony capitalism and excessive government regulation are all inter-related."

Fuck It. I have links to support you statement.... it mirrors the decline of US Farmers over the last 100 years.

Without small business there is no democracy, free speech, whistleblowing, or patriotism.

This is key to democracy.

This is a reason to die.

This is the keystone to Keeping US Constitution.

Ignore this and lose your lifestyle and country. This is Prime for Freedom & the Concept of the "USA".

FU if you disagree!!!

random999's picture

LOL here in Sweden we got a cure for that illegal business you are talking about.

Welcome to the cash free society!

All gates are sealed now..enjoy the ride!

PrecipiceWatching's picture

Individual autonomy, self-sufficiency and reward for ambition and merit do not fit into the Communist game plan.

Oldwood's picture

Centralized control demands centralization of control which means.....if they can get every employee in the land to work for ONE employer, then they have successfully centralized their control. Guess which employer will be the last one and only? Small business, much less self employment is as far from this concept of centralized control as one can imagine...and must end.

e_goldstein's picture

Guess which employer will be the last one and only?

Service Corporation International?

junction's picture

When David Stockman states that the U.S. economy shows job increases only in the education and medical fields, Stockman conveniently leaves out the giant growth in jobs relating to sanctioned government corruption.  Specifically, the "fixers" who go under names, such as lobbyists, consultants and legal counsels.  Look at New York City, where builders of high rise super expensive apartment projects ride roughshod over the city government to get variances.  Companies such as the Related Company, Trump, Forest City Ratner and Extell get height and density variances and, in the case of the Extell's One57 advertised 90 story apartment house on west 57th street, a tax abatement of at least $40 million obtained by buying off Governor Cuomo and the the state legislature.  Donald Trump set the standard for creating jobs that "grease" the wheels of government: his Hyatt Regency on 42nd street could only be built in 1978 after the Urban Development Corp. evicted all the leaseholders at the site, once the Commodore Hotel.  That usage of the eminent public domain to enrich private developers was perfected in New York City under the administration of Mayor Koch , who was organized crime's front man, the crimelords who controlled the city's concrete supply business back in the 80s.  Now, even a hospital like St. Vincent's is demolished to make way for a high rise building, creating jobs for ex-politicians turned consultants and all the other lice hired and paid to run roughshod over building laws and laws regarding government corruption in approving contracts to certain companies.  Construction corruption is a vast and growing job creator in places like Mew York City.    

TeethVillage88s's picture

oudinot:

You've Got It.

"Without robust small businesses there will be no real growth in the economy."

Small Business is the Core of the US Economy... in fact the US Federal Government had contract programs set up to strengthen small business contractors in DoD... but think the government is now Fascist and moving away from this "Old Program"

ekm1's picture

If you think it can't get any worse than this, you ain't seen nothing.

 

At zero % interest, credit is cancelled. Current US economy is a reserve based economy like communism, not credit based.

 

This is gonna get worse and worse and worse and worse.

Grande Tetons's picture

Some folks are going to feel some pain. 

AdvancingTime's picture

I deal with small business on a day to day basis and I will tell you they have little reason to be optimistic. Small business, with two to ten employees, are becoming an  endangered species in America. The family business once the backbone of this country is under attack from the unintended consequences of the many laws and mandates passed in recent years.

Inspections, a plethora of permits, licenses, taxes, insurance requirements, and regulations make it almost impossible for a small business to open, compete, and operate legally. Big government has become toxic for small business. More on this subject in the article below.

http://brucewilds.blogspot.com/2012/03/small-bussiness-under-attack.html

Grande Tetons's picture

Keep up the good work. This place sucks without Fonzanoon.  At least I get to read some decent posts from time to time. 

Grande Tetons's picture

...apparently he bailed. Smart move. 

seek's picture

DoChen as well, but he left a sign-off message. He hasn't updated his blog since then, either.

Absinthe Minded's picture

Damn I missed it, Do Chen was a good person. I hope he has done well enough in bearings to have a nice quiet retirement. He's in Peru, correct?

seek's picture

I think he split his time between the US and Peru. Perhaps his exit reflects a permanent relocation, we don't really know.

Praetorian Guard's picture

If anyone is interested in coming over to www.gunsgrubandgold.com you are invited. Trying to get the forum off the ground and looking for members and mods... thanks...

delivered's picture

AT, same here as I deal with small businesses each and every day. I watched in horror as while Wall Street was bailed out in 2009 (think GM, AIG, etc.), Main Street was told to bend over the rail, drop their pants, and take it like a man. Here's some additional thoughts on the state of small businesses:

- Those that were too weak to weather the storm over the last five years, have simply closed shop.

- Those that made it, stablized, and rebounded (usually by going "all in" with their personal wealth) have either sold out as they have no interest in experiencing another torch job, are considering selling, or are taking advantage of what's left of the weak and have become middle sized companies. I've directly assisted a number of companies with selling the last two years and specifically to larger organizations, with cheap Fed money, that are consolidating industries. There are almost no what I consider horizontal buyers (a small time business person that has the means and interest to acquire a small business and grow it).

- The capital required to form small businesses is nowhere to be found. We're not talking about VC/PE/Inst funding tech and life science companies. Rather, we're talking about hard working men and women that want to start a business but have no real means as if you remember, first they lost everything in the home they owned in 2008, then their investments in 2009, and then their steady income with job losses. 

- If capital is available for small businesses, it is brutally expensive and comes in the form of ruthless lenders, with embedded interest rates of 50% to north of 100%, preying on the unsuspecting and weak and backed by, you guessed it, large banks looking to exploit the hard money lending environment. Corporate America has the Fed and its free money to finance M&A's and stock buybacks at basically no cost. Small businesses, well they have Vito Corleone down the street.

- Now let's throw on to this pile the fact that competing for quality labor is damn near impossible (given the packages offered by large companies again backed by cheap money), sales increasingly difficult to generate as the average consumer is strapped, and a regulatory environment (especially here in the socialist republic of California) that favors everyone and everything but the small business owner, and you have the perfect storm for killing the very Golden Goose that represented the basis of the American dream for over a 100 years.

One other point in the article as it missed something. The middle class's path to wealth was not just based in jobs or business ownership but in addition, home ownership. These three elements provided for wealth accumulation by the masses, all of which have been virtually eliminated as we know quality job growth is dead in the water, this article supports the trend everyone already knew related to small business ownership, and over the past five plus years, the middle class are now renters as oppossed to owners (again, paying their hard earned money to the big funds backed by cheap Fed money). 

During the 20th century, America was without question one of the greatest producers of wealth, innovation, and real standard of living increases the world has ever witnessed. Over the past 20+ years, America has been "finacialized" by Wall Street and now is nothing more than the greatest transforer of wealth the world has ever experienced. This country has really produced no real wealth over the past 20 years but it certainly has transferred it from the masses to the few. 

Of course what will be real interesting is when the Zombies start to turn on one another for food as the masses have nothing left, no money, no wealth, no homes, no pride, nothing. We can only hope and pray that they quickly destroy themselves with their excessive greed, egos, and immoral actions so we, the people, have a chance to start again.

 

Seize Mars's picture

delivered

Your point about lending:

Corporate America has the Fed and its free money to finance M&A's and stock buybacks at basically no cost. Small businesses, well they have Vito Corleone down the street.

There is no Vito Corleone. That's a fake invention of Hollywood.

Here is a youtube about actual organized crime. Hint: "Murder, Inc." wasn't Italian. It's a longer video, but give it a watch. It's fascinating.

http://www.youtube.com/watch?v=wMbw5X_eeJg

 

teslaberry's picture

fuck you anti-semite. posting david duke garbage troll. 

Seize Mars's picture

teslaberry

Whoa! Where did that come from? I'm not antisemitic. If I was I would just say so.

Why would you say that about me?

Seize Mars's picture

teslaberry

Dude, seriously? If we were both to repeat the meme that Sicilian-Americans are gangsters, would you shriek about racism (toward Italians)?

Are you actually telling me that there is no data (you know, actual facts) to show that a lot of organized crime happens to be, you know, a particular ethnic group?

Can we stick to actual facts?

What are you afraid of? It's ok to say that about the Italians? But not, you know, the others?

No Quarter's picture

 You have it spot on. I barely survived 2008-2009. Lots of others in our industry, both locally and nationally did not. Since then, it has been a struggle. The F'd up thing is we make MORE money than ever before, but the cost of parts/supplies/insurance/overhead etc have gone way up, parts profit has shrunk and labor cost is already at the max of what our market will bear... its been eye opening (and sickening) to actually watch in real time the destruction of the buying power of the dollar. And hiring qualified, EXPERIENCED personell is extremely difficult. The big dealerships can provide the benefits spread out over 1000's of employees that we simply can't match, even if we all know its fluff..  Love the business i've been in for 20 years, but if i thought i could get a good price for my business, i'd probably sell it and go do something else. 

 

crazybob369's picture

You nailed it. One other thing I rarely see mentioned as a cause of small business failure is the inexorable advance of the min. wage. Many small business owners would be happy to pay some high school kid $3-$4 an hour to come in for a few hours a week and straighten up a stock room, clean the bathrooms, sweep floors, etc.. At $7-$8/hr (effective rate ($10-$11), it ain't gonna happen. So, they either have to do it themselves and work another 20hrs per week, leading to burnout, or add it to the tasks of other employees, leading to unhappy, disgruntled workers. 

acetinker's picture

What makes you think the consequences are unintended, pray tell?

TeethVillage88s's picture

ekm1;

You don't post links or documents. You are more of a Director than an educator/trainer.

- You posted a Great Statement above. Clearly you are contrarian or a Bear (to my amateur eye at least). I'll have to continue to read your to see what your philosophy really breaks down to be.

- FYI I am a lousy short term investor and probably slow like Jim Rodgers (who I Like).

- Why would I buy Bonds or Stocks in this Environment? No reason. Why buy Government Bonds? No Reason. Why keep my money in a US Bank? No Reason. Why Support either Democrats or Republican in the face of ZIRP, LIRP, NIRP? No Reason. Revolution. VOte with your Feet, Money, Banking, and Housing... live in small houses, group in houses, live with family, live with friends, give up on paying Tuition, Give Up on Spending & Consuming. *%@#%

http://research.stlouisfed.org/fred2/series/LNS12027714 (self employed unincorporated)
http://research.stlouisfed.org/fred2/series/LNU02048984 (self employed incorporated)

data back to 1984 decline in number of us banks:
Commercial Banks in the U.S.
2014:Q1: 5,743 Number (down from 14,400 in 1984)
Quarterly, End of Period, Not Seasonally Adjusted, USNUM, Updated: 2014-05-21
http://research.stlouisfed.org/fred2/series/USNUM

ekm1's picture

I pontificate.

Simply my opinion and analysis.

 

Living within your means is the least depressive way to live, agree