Several studies and reports have highlighted the decline of small businesses in the United States over recent decades. Here are some key findings from notable studies.
1. Brookings Institution Report (2014)
- The report titled “The Slowdown in Business Dynamism” found a significant decline in the rate of new business startups. The annual startup rate fell from 13% in the 1980s to around 8% by 2011. This decline suggests fewer small businesses are being created, which is a crucial indicator of overall economic dynamism.
- It also showed that the share of firms less than one year old had dropped from 13% in the 1980s to about 8% by 2011.
2. Kauffman Foundation Reports
- The Kauffman Index of Startup Activity has indicated a general decline in new business formation over several years. Although there have been some years of recovery, the long-term trend shows fewer people starting new businesses.
- The Kauffman Foundation’s “Main Street Entrepreneurship” reports have shown that the survival rates of small businesses have decreased, and fewer businesses are reaching maturity.
3. Economic Innovation Group (EIG) – “Dynamism in Retreat” (2017)
- This report highlights a decline in economic dynamism, with fewer new businesses being started and more existing businesses failing. The share of employment in new firms (less than one year old) fell by almost half from 1992 to 2011.
- It also points out that the U.S. economy is becoming increasingly dominated by older, more established firms, leading to less innovation and fewer opportunities for small business growth.
4. U.S. Census Bureau Data
- The Business Dynamics Statistics (BDS) program data shows a steady decline in the startup rate since the late 1970s.
- The number of small employer firms (firms with fewer than 500 employees) has also seen slower growth, and the proportion of employment accounted for by small businesses has decreased.
5. Federal Reserve Reports
- The Small Business Credit Survey conducted by the Federal Reserve Banks often highlights challenges faced by small businesses, including access to credit, competition from larger firms, and regulatory burdens.
- The 2021 report showed that a significant number of small businesses faced financial challenges, with many reporting revenue declines and difficulties in accessing necessary credit.
6. Harvard Business Review (HBR) – “Why U.S. Entrepreneurship Is In Decline”
- The HBR article discusses several factors contributing to the decline of entrepreneurship in the U.S., including increased market concentration, rising student debt, and shifts in workforce preferences.
- It also points to a decline in the entrepreneurial spirit and risk-taking among younger generations as a contributing factor.
These studies collectively indicate a multifaceted decline in the health and vibrancy of American small businesses, characterized by fewer startups, lower survival rates, and greater challenges in growth and sustainability.