20% decline in small firm employment

There are nearly 5 million small businesses in America, firms with less than 500 employees.


On average, they employ 11 workers each and produce $1 million of output annually.

They account for 60% of job creation, and nearly half of all employment and economic output.

But, says Citigroup, “the US small-firm sector is under substantial stress.” Small firm employment has declined about 20% relative to large firm employment versus its peak in the mid-1980s — including a 10% drop since the late 1990s.

And the small-firm share of output produced by the private sector has declined to 45% in 2010 versus 50% in 1998. And, as the chart at the top shows, the birth rate of new small firms – the number created in a given year relative to the total number of such firms – has fallen to around 8% vs. 10% before the financial crisis and 12% in the 1980s.

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