SMALL BUSINESS PERSONS AND EGALITARIANISM

They would be MUCH better off in an egalitarian society

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Small business persons have every reason in the world to desire an egalitarian revolution in the United States. Their lives in an egalitarian society would be improved in terms of both their material standard of living and their emotional well-being. Here's why.

First, let's see who exactly we're talking about with the phrase "small business person." A 2013 Forbes Magazine article, "16 Surprising Statistics about Small Businesses," reports that while the Small Business Administration defines a small business as one having fewer than 500 employees, of the 28 million such small businesses in the United States, a whopping 22.5 million (80%) are run by self-employed persons with no additional payroll or employees.

From this report, based on the U.S. Census Bureau, on employment size of ALL firms, we see that out of a total of just shy of 8 million United States businesses, about 55% have less than 5 employees, 18% have 5 to 9 employees, and 12% have 10 to 19 employees.

Regarding just small businesses (see the definition of "small business" here), "out of the 33.2 million small businesses, 27.1 million are run by a single owner and have no employees." "Over 8 out of 10 small businesses have no employees." [source here, which in turn is based on data from the U.S. Small Business Administration Office of Advocacy. The total number of United States businesses given by the U.S Census Bureau source used in the above paragraph is oddly smaller than the number of U.S. small businesses given by the source used in this paragraph; I assume this is due to different definitions used by the two sources.]

From this source we read:

So, how many employees does a small business have? According to recent statistics, here’s how the numbers look:

• 81% of small businesses have no employees

• In 2019, startups averaged 3.3 employees per business

Thus the overwhelming majority of small business persons are either self-employed with no employees (80%) or with very few employees. Only 3% of small businesses employ more than 20 employees.

How much money do small business owners make?

A November, 2022 source reports: "According to PayScale, the average small business owner income is $60,648 per year. But, total earnings can range from $29,000 – $127,000 per year."

Most don't make very much. One source states that, "In 2008, the average nonfarm sole proprietorship had revenues of only $58,256 and net income of only $11,696."

According to the Forbes article, the average annual revenue of self-employed (no employees) businesses was only $44,000, of which the business person's take home income was necessarily only the part remaining after costs of running the business were covered by this revenue. 80% of these "nonemployer" businesses had annual revenues less than $50,000.

This 2021 source reports on the incomes of what most people have in mind by the phrase "small business owners"; it describes these "everyday" small business owners this way:

Everyday Small Businesses​

Everyday small businesses are the kinds of businesses that aren’t likely to revolutionize their industries. They’re the gig workers, solo businesses, and business owners with just a handful of employees. They’re the software developers, electrical contractors, freelance writers, salvage companies, bagel store owners, consultants, automotive parts dealers, pet store owners, Internet publishers, accountants, small manufacturers, and other companies that provide needed products and services that aren’t revolutionary in concept. They started a small business in your town or at the local strip mall. They’re the businesses in the local industrial park or office building downtown. And they are the home-based businesses in your neighborhood or maybe your own basement. They generate income, but not big bucks. Some are side gigs or part-time operations. Most are full-time businesses.

For the most part, these small businesses have few employees. According to the latest U.S. Census Bureau statistics, there were about 7.6 million employer firms (i.e., businesses with employees) operating in the United States in 2017. Of those businesses, 89% have less than 20 employees.​

In fact, the majority of U.S. small businesses are very small. Approximately 80% of small businesses are non-employer businesses. A December 2020 report from the Census Bureau shows approximately 25.3 million nonemployer businesses in 2017. These non-employers are self-employed individuals who pay taxes but are not counted in the monthly jobs reports that are based on payroll data because they do not have a payroll.

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Of the business owners in the U.S. who responded to that question [how much income], 31% had household incomes of $100,000 or more, and 35% had household incomes between $50,000 and $99,999.

By way of comparison, Payscale reports that the average salary of small business owner/operators is $65,486. [My emphasis]

Note that 31% having household incomes of $100,000 or more equates to 69% having household incomes less than $100,000. This will be relevant to the discussion below.

A Better Standard of Living

To put this in perspective, consider that the total U.S. personal income in 2022 was $21.8 trillion and the U.S. population that year was 333,287,557. Doing the division yields a per capita (what every person--man, woman and child--would have if each had exactly the same) income of approximately $65,409. This means that had there been an egalitarian distribution of income in 2022, a family of four would have had an income of $261,636 that year.  Sixty-nine percent of small business owners have a household income less than $100,000; their income (compared to the $261,636 income of a family of four if income were perfectly equally distributed) is much less than if income in the United States were equally distributed.

In terms of very narrowly defined (i.e., income) material standard of living we see that the great majority of small business owners would actually be better off in an egalitarian (no rich and no poor) society than they are in the present one. But their lives would be better in even more important respects, because of the fundamental difference between an egalitarian society and our present one.

Small business owners--especially when there are no other employees--often work far more hours per week (and per year) than most people would consider reasonable. In an egalitarian society they would share equally in the wealth of society while only being expected to work a reasonable amount.

Greater Emotional Happiness

Many small business owners today try to make the business one in which the employees are treated fairly and feel "part of the family." But the need to turn a profit and compete with other businesses makes this very difficult. The owner is caught between a rock and a hard place: provide good health insurance to the employees and go out of business, or deny good health insurance in order to stay in business. What a choice! What a recipe for emotional distress to the owner, not to mention the employees. This dilemma would vanish in an egalitarian society in which all who contribute according to reasonable ability have the right to take—for free—what they need or reasonably desire and get scarce things that are equitably rationed according to need.

In an egalitarian society, in contrast, former small business owners who had hired employees would enjoy a much more friendly relationship with the other workers in the business. Why? Because the workers in any enterprise would be equals with respect to formal status in decision-making and standard of living. (Informally, those with greater knowledge and experience and skill would command greater respect for their opinions, of course.) All of the workers would share a common desire for their enterprise to have a good reputation in the larger society so they can maintain their membership in the sharing economy (which enables them to take what they need from stores for free or, in the case of scarcity, have the same chance as others to obtain what is rationed according to need.) The business would be about providing a service to the society, and its workers enjoying, in consequence, the right to share in the wealth of society according to need. No longer would a particular person--the former owner--need to get the other workers to work more for less pay in order to make the business turn a profit. All of the old antagonism and resentment that was generated by this conflict of interest would vanish. This gain in emotional happiness is priceless.

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What a Small Business Owner Said about this article

Here is a comment on this article by a small business owner. He left this comment on my Facebook posting of its earlier version (just older dollar figures) on January 13, 2014.

"John, I spent 30 years as owner of a small contracting business with up to twenty employees. You hit the nail on the head regarding small business life. I thought very often over the years about the false perceptions that are perpetrated regarding the efficiency of the competitive, dog eat dog system I operated within. There is a huge regulatory (policing) apparatus required to attempt to rein in the actions businesses take in their attempts to compete and survive. HR conflicts are constant, struggling to find affordable health care each year. Attempting to navigate federal, state, local and private rules and regulations and bidding requirements required a staff of employees in itself - and this is all tied to competition. I often wondered what a true accounting of the overhead burden of a company would reveal about just how efficiently products and services are produced and delivered in our capitalist system. As much profit driven regulation as there already is, much more is needed to attempt to protect the environment and for many other reasons - all because of the profit motive. Replacing the narrowly focused, profit driven system with a resource based, non monetary one is critical to the future of the whole planet. Many small business persons become consumed in an unhealthy way, in their attempts survive while being fair with employees, customers and themselves."