Business Contributions to the Economy
Posted on by Alissa DeJonge
Businesses provide numerous benefits to an economy in the form of products and services for use by society, tax revenues to governments, payroll to employees, and innovations, among others. Businesses range in type from sole proprietors to multi-national conglomerates.
The figures below show how many companies are located in Connecticut by employee size, and how many people are employed by those different-sized companies. The 2018 data is available from the Connecticut Department of Labor, and refers to worksites, which is a count of firms, excluding government, that have only one location, plus a count of each location of firms that have operations in more than one location.
The figure on the left shows that of the 118,727 worksites (businesses) in Connecticut in 2018, 62% had 4 or fewer employees, and 2% had 100 or more employees. The figure on the right shows that 28% of the 1,468,468 Connecticut employees work at sites (businesses) with fewer than 20 employees, and 16% of Connecticut employees work at sites with more than 500 employees.
Small, mid-sized, and large businesses play important roles in our economy. This trend is true not just in Connecticut but for the U.S. as a whole. They all contribute to the number of worksites, total employees and annual payroll. Research conducted by the U.S. Census Bureau shows that small firms (fewer than 20 employees) have been a major force for both job growth and job loss. The U.S. Census research shows that firms in the U.S. with fewer than 20 employees “had an average job creation rate of 20.8 compared to an average of 12.6 for firms with more than 20 employees. Further, these smaller employer businesses had a job destruction rate, or job loss rate, that was twice that of larger firms.”1 This volatility, or business churn, promotes innovation; and the smaller firms that find a niche and a market set themselves on the path to becoming larger firms. An economy that is diverse in terms of the sizes of companies can be a great path for sustainable economic growth.
1"What is the Actual Impact of Small Business on the Economy" The Balance Small Business