How Many Small-Business Employees Are Out There?

Steve King

With the debate around healthcare legislation heating up, a lot of attention is focused on the role small businesses play in the U.S. economy. I often read and hear that most Americans work for small businesses.

But it is interesting to note that not everyone agrees on what a small business is, how many there are, or how many people work for them.

According to the Census Bureau and the Small Business Administration, about 60 million Americans worked for small businesses in 2006. This is about 51 percent of the private, nonfarm U.S. workforce. They define small businesses as private firms having fewer than 500 employees.

However, if you add in state, local, and federal government employees (about 20 million) and agricultural employees (about 2.2 million), you end up with small businesses employing about 43 percent of the U.S. workforce.

Others have different numbers. The "ADP Small Business Report," for example, says that 83 percent of the private, nonfarm workforce is employed by businesses with fewer than 500 employees. This is substantially higher than other sources. ADP's small-business definition seems to be based on payroll size instead of firm size. This means small parts of larger corporations—like a bank branch or a retail store that is part of a national chain—could be included in the small-business category if they have an independent payroll.

Many also argue that defining a small business as having fewer than 500 employees is wrong. Some will tell you that this is way too high and that real small businesses have fewer than 100, or 50, or 20 employees. Others believe a 1,000-employee business is a small business.

The good news is that few deny that small businesses play a key role in the U.S. economy. This was not true in the past. It is also good to see that the impact of the proposed legislation on small businesses is central to the debate. And while small-business owners may or may not like the final legislation, at least their concerns are being raised.

Steve King is a partner at Emergent Research , where he leads an ongoing research project to identify, analyze, and forecast the global trends and shifts impacting small business. He blogs at www.smallbizlabs.com.