How can a small business address unemployment?

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The first and most straightforward way that a small business can help deal with unemployment is by hiring individuals. Small business owners should hire locals that have the right expertise. They should also give them adequate compensation so that they can empower the rest of the community.

A small business owner should also support education programs for the local youth, since unemployment is partly caused by the lack of appropriate skills. The business can go a step further and sponsor economically disadvantaged students.

A small business can also buy some of its raw materials from local manufacturers. Businesses depend on each other to survive; therefore, when a small business owner buys from another firm, they enable that company to employ another local.

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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.

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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


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