To ensure the tentative economic recovery becomes a lasting expansion, the Obama administration must focus on helping small businesses hire again.
The Gross Domestic Product (GDP) is back on the rise, and the pace of job losses has slowed. However, businesses are not hiring yet, and the government is doing too little to support small businesses, the business sector most likely to spur job growth, said Mark Zandi, the chief economist at Moody’s Economy.com, in an op-ed in today’s New York Times.
Small businesses are especially vital to job growth. Establishments with fewer than 20 employees account for 25 percent of all jobs, but these same-sized companies generated 40 percent of the job growth in the last economic expansion, from 2003 to 2007. In their recent efforts to recharge the economy, policy makers have all but forgotten small business, finding it both easier and more visible to help large multinational firms. Unfortunately, though, big business can’t provide the jobs needed to power the economy forward.
The government can support small business expansion and hiring by empowering the Small Business Administration to back more credit to small businesses, Zandi argued. He illustrated three steps to promote small business growth:
- “Increasing the maximum size of an S.B.A. loan and temporarily raising the percentage of the loan guarantees to as high as 97.5 percent, from 90 percent.”
- “Extend provisions in the current stimulus bill that allow money-losing firms to receive refunds of taxes paid on profits earned in previous years. (In return, they agree to pay higher taxes in the future.)” The provision is scheduled to expire in December. Extending it one year would provide quick cash to many firms on the brink of bankrupcy, Zandi said.
- “Minimize the number of new job losses by promoting work-share programs,” which lets a business avoid layoffs by reducing workers hours and allows the state to make up a portion of lost wages in unemployment benefits.
For more on small-business jobs: