Who are the Job Creators?

I had an interesting conversation with a pair of one-percenters last week. I specifically asked them whether lowering their taxes would result in them creating jobs. Neither one hesitated to answer.

“You’ve got to be kidding,” said one.

“Nope,” said the other.

Why not? I wanted to know. The Republican party has been telling us for years that the way to create jobs is by lowering the taxes on the wealthy. Where’s the fault in the position?

Both of my one-percenters agreed that established companies don’t create new jobs unless they are also expanding, something they do when their business model and business plan indicate the time is right, not when the amount of taxes they pay changes. Tax savings amounts to larger profits remaining with the company, not expansion plans. Every corporation’s main priority is its bottom line. The large business interests and high-income individuals who will benefit from this tax deduction definitely want to improve their bottom line – who wouldn’t? – but they aren’t so altruistic that they are going to hire people they don’t need to do jobs that don’t need doing.

Payroll is the single largest expense of any company. It seems that people who own businesses want to get more done with fewer employees, not with more, because getting more done with a smaller payroll increases profits. That’s why outsourcing is so popular among the most profitable companies.

So who are the real job creators?

According to 2007 and 2008 economic census figures, “nonemployer” firms account for a vast number of businesses in the country – more than 78%. The Census Bureau defines nonemployer businesses as those that have no paid employees and are subject to federal income tax. Nonemployers include self-employed individuals operating unincorporated businesses, which may or may not be the owner’s principal source of income.

Of the remaining 22% of businesses, 89% are companies employing less than 20 people. That means more than 97% of the businesses in this country are small businesses, not large corporations.

Looking even more closely at the numbers, we see that businesses with more than 500 employees employ about half of all Americans who work for someone else. Even though they account for only 0.0036% of all firms, truly giant megacompanies with more than 10,000 employees put 27% of Americans to work.

More than 17% of people in America work for companies that employ between 20 and 100 employees. These are medium-sized companies, and constitute about 9% of the businesses out there. The next jump in statistical size is the large companies, which employ between 100 and 500 workers. These large companies put 14.5% of Americans to work.

So, although 97% of the companies in the US are small businesses, 82% of employed Americans work for large, very large, and mega-sized companies. Eighteen percent work for small businesses. Those figures add up to about 121 million people who earn income in the United States, not counting the 21 million whose self-employment provides them with some or all of their income.

If the big companies get the tax breaks, which apparently have no impact on whether or not they create jobs, who benefits? The big companies, of course.

Last Updated on January 6, 2024 by Anne