Hillary and Bernie at War with Big Business

As long as I can remember, Democrats have hated big business. They claim that they have too many tax loopholes; don't pay their workers well; ruin the environment; don't provide good healthcare plans or other benefits; and ship jobs overseas.  Its no wonder then, that during this election cycle, both Hillary Clinton and Bernie Sanders have both tried to outdo each other by bashing big businesses and, in doing so, have promised big regulatory changes to put them in their places.

The problem is that this is simply unfounded, political talk.  Most people don't realize how crucial big business is to the economy and jobs.

First, there's job creation.

Data Source: Bureau of Labor Statistics

As you can see, since 1990, the vast majority of new jobs -- 65% --  were created by big business.  Before you decide this is some right wing propaganda, the above chart was put together by Jared Bernstein; a former economist for the Obama Administration and economic adviser to Joe Biden.

Besides creating a lot of jobs, large businesses pay well.  On average, those firms pay their employees 50% more than those employees working at small companies.  So, obviously, if we want to give America a raise -- as President Obama has said in the past -- our focus should be on helping big businesses grow jobs. 

Then, there's health insurance.

What this collection of charts shows is that -- 3 years before the ObamaCare employer mandate went into effect -- nearly 100% of large businesses offered their employees health insurance; even though the author of these charts considers businesses with 200+ employees a large business rather than the accepted standard of 500+ employees.   But, even so, it shows that large businesses -- besides paying better -- also provide greater benefits; this also includes retirement programs.  While most large companies offer profit sharing, pensions, or matching contribution 401K plans, only 24% of small businesses offer similar retirement plans.  Most workers at smaller firms must either rely on Social Security or their own savings after retirement.  Also, if they do offer a 401k, the value of it is most likely much smaller smaller employers simply cannot afford matching dollar programs like those offered by large organizations.  This is one of the primary reasons why 9% of retirees in this country are in poverty.

Last year, the Bureau of Labor Statistics reported that the typical American family lost $800 in income.  This tells me that we are creating too many small businesses and do not have enough expansion of existing big businesses which typically create more jobs with higher pay and better benefit programs.  We need to encourage the growth of large companies in this country by allowing them to bring back already-taxed overseas profits without having to be taxed a second time at the highest corporate tax rate in the industrialized world.  To that point, we need to lower the corporate tax rate to be competitive with other countries.  The last thing we need is Hillary Clinton and Bernie Sanders promising to further retard large business growth through more regulation.  We've had enough of that from Obama; resulting in overall lower pay for the middle class.  We certainly don't need Hillary's misguided pledge to be the "Small Business President".

References:

On big business, Clinton moves to the left of Sanders:  https://www.washingtonpost.com/opinions/on-big-business-clinton-moves-left-of-sanders/2015/07/30/203e3ba2-3624-11e5-9739-170df8af8eb9_story.html

Jared Bernstein: Getting Straight on Small Business Job Creation: Firms vs. Establishments: http://www.huffingtonpost.com/jared-bernstein/small-business-job-creation_b_1685869.html

President Obama: It's Time to Give America a Raise: https://www.whitehouse.gov/blog/2014/03/05/president-obama-its-time-give-america-raise

Big firms pay 50 percent higher wages than small businesses, study shows: http://www.washingtonpost.com/business/on-small-business/big-firms-pay-50-percent-higher-wages-than-small-businesses-study-shows/2012/11/28/e24a1f58-3970-11e2-a263-f0ebffed2f15_story.html

Employer-Sponsored Health Insurance - 3 Questions All Small Businesses Should Ask: http://www.zanebenefits.com/blog/bid/324135/Employer-Sponsored-Health-Insurance-3-Questions-All-Small-Businesses-Should-Ask

Working for a Small Business? Your 401(k) Is Probably Small, Too: http://time.com/money/2850490/small-business-may-mean-small-401k/

Why you may retire in poverty: http://www.reuters.com/article/2012/08/07/us-column-miller-poverty-idUSBRE8760VW20120807

Typical American Family Earned $53,657 Last Year: http://money.cnn.com/2015/09/16/news/economy/census-poverty-income/

Obama’s 3 Strikes Against Big Business: http://www.cheatsheet.com/business/obamas-3-strikes-against-big-business.html/?a=viewall

Small Business | Issues | Hillary for America - Hillary Clinton: https://www.hillaryclinton.com/issues/small-business/ 

 

The Decline of Small Business Employment in America

Starting a new business has always been a risky endeavor.  Today, 25% of all new businesses fail in the first year. 50% in the first 4 years, and by year 10, only about 29% are left standing.  With odds like that it's no wonder that business creation is in decline in America.  What person or lender is going to be willing to risk everything by funding something that could easily fail in the first year, and increasingly, every year thereafter?
Still -- except for recessions -- this country has always been able to create more new jobs from startup companies than job losses due to failed ones, as noted by this chart from the Bureau of Labor Statistics' Business Employment Report from 2009:

Most notably from the above chart, employment from new businesses has been steadily declining since 1999 when new business job creation peaked in America at 1.95 million.  Then, at the worst point of the Great Recession, it fell to a twenty-year low of just 1.15 million.

Following the end of that recession, and except for a single-quarter aberration in 2012, job creation somewhat rebounded and has been pretty much moving sideways at around 1.3 million jobs; with losses mostly remaining lower than those being created.

Whether or not this is a trend or merely a pause in pre-recession declines is anyone's guess.  It could be that the pause is a result of the reopening of once-profitable businesses that had failed previously during the recession.

Even so, job creation from new businesses is nowhere near the high of the 1990's; or, for that matter, 2004 levels.  Some say the decline is due to the high cost of compliance with local, state, and federal rules governing businesses and their operations.  Others say the high failure rate has made less money available for new ventures.  Another might be the rise of the "big box" stores like Walmart and Target that are crowding out small retail businesses. Still, many think the pool of new ideas is just logically shrinking.  Whatever the case, small businesses and their share of jobs are on the wane:

As this graph shows, small businesses -- businesses under 250 workers -- have declined from providing 51% of all jobs in the U.S, to just a little over 47%.  The simple reality is that big companies have become the engine for job growth.  The era of small businesses being the job creators is over.  The American Dream may have become just that -- a dream.

References:

Startup and Business Failure Statistics: http://www.statisticbrain.com/startup-failure-by-industry/

Entrepreneurship and the U.S. Economy: http://www.bls.gov/bdm/entrepreneurship/entrepreneurship.htm

BUSINESS  EMPLOYMENT  DYNAMICS  – THIRD  QUARTER  2009: http://www.bls.gov/news.release/archives/cewbd_05202010.pdf

BUSINESS  EMPLOYMENT  DYNAMICS  – THIRD  QUARTER  2014: http://www.bls.gov/news.release/pdf/cewbd.pdf