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Small businesses are actually the major engine of the economy, especially now that much of our manufacturing jobs have moved overseas, so they play a crucial role in employment. Many economists can predict how well or poorly our economy is doing based on what small businesses are doing at the time.
President Obama has proposed encouraging $30 billion in loans to small businesses for exactly this reason. Another way they can help with unemployment is by hiring more workers for fewer hours - essentially exchanging unemployment for "underemployment". They keep workers on the payrolls, but everyone works less hours. We see this happening a fair amount because people who work less than 40 hours per week are often not eligible for benefits, which saves them money.
Of course, one single small business cannot really do all that much about unemployment. However, when you put them all together, all the small businesses in the United States could do a great deal to help reduce the level of unemployment in the country.
According to the Small Business Administration (part of the federal government) small businesses (less than 500 employees) employed more than half of the workers in the country and really small ones (20 or less employees) employed about a quarter of all American workers.
There are so many small businesses that, if they each hired one or two more people, the unemployment rate would drop considerably.
People argue about how to help small businesses hire more people. Some ideas are:
- lower taxes on them
- have fewer regulations on them
- make it easier for them to borrow money from banks so they can expand
A small business in an economy is like a drop of water in a big water tank. By itself one small business cannot make mach difference to the level of water in the tank. Still the level of water in the tank is determined by collective influence of all the drops in it.
Thus, though the impact of an individual small business on total employment may not be visible, the actions and performance of individual business does matter. A business will be serving the general interest of the entire economy best by first improving its own value added, which may be reflected in its profits, but is not necessarily same as its profits. Next the business can pay attention to using business processes that attempts to make best use of manpower resources rather than indiscriminately use technologies that replace people by machines. There is no point in hiring and using additional manpower that reduces productivity and increases cost. Worldwide experience over centuries has confirmed that in the long-term use of advanced technology helps economies to increase productivity as well as total employment.
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