2. The Myth of the Entrepreneur: Entrepreneurship and Social Development: Entrepreneurship and Employment.

In my recent article I used data to show how the view of the entrepreneur as a wealthy hot-shot, comparable to Big Tech Founders, and Hedge Fund Managers is simply an unrealistic and untrue myth. So what is true about Entrepreneurs, and why should they bother with the hard work of the role?

Well, in the previous article I showed that, based on averages, 80% of entrepreneurs work alone and make less than $50,000/yr (and a majority of that 80% may make under $30,000). So an entrepreneur probably should not do it for the money. But money is only one part of business. There are a lot of (more important) reasons we work and engage in economies. Even if we don't think about it almost all of these reasons are social, and I'd like to propose that entrepreneurship is a backbone of social economics, and a crucial component to building strong communities, and societies, especially on the macro-level.

We may not notice all the small things entrepreneurs, and businesses do socially, but when we analyze the big picture of society, we can start to see how the actions of entrepreneurs--even if they're flat broke--are having a crucial and positive impact on societies and economies. In the next articles of this series, I'll outline a few real practical ways we see this playing out. But for now, there are two entrepreneurial phenomena we can look at. First, and undisputedly, entrepreneurs create jobs. Second, entrepreneurship has been shown to advance social equity, and workforce equality.

Entrepreneurship creates jobs. Only 15% of US jobs, and 20% of Canadian jobs ( and 1/3 of jobs globally) are in the public sector. Leaving the remaining 67%-85% of jobs in the private sphere(1*). Since a private party needs to start a private organization, this means that a large majority of jobs have been created by private entrepreneurs who have assumed the risk of starting businesses and non-profits. In the US, these private, entrepreneur-led organizations, employ up to 85% of all US workers.

Of the 85% of all workers employed by entrepreneur-led organizations, 60% of them (or 50% of all workers in the US) are employed by small businesses. Even the 80% of entrepreneurs/business owners who work alone are creating jobs. Of course, they are creating a job for themself, but even though these "non-employers" don't have W-2 employees, many of them are hiring other entrepreneurs, and workers from other companies.

35.5% of solopreneurs hire contracted workers, and 42% of entrepreneurs who have employees hire additional contractors. Both, therefore are creating substantial work opportunities, not only for themselves, but for others in their communities as well. Based on the aforementioned percentages, and given that there are over 33 million small businesses, we can safely say that small businesses alone, create an additional 10 million contracted jobs, 80% of which are created my solopreneurs, or "non-employers"(2*).

In the US there are roughly 167,000,000 workers. Roughly 135,000,000 of these workers are employed by the private sector (entrepreneur-founded). And roughly 80,000,000-90,000,000 of these workers are employed, self-employed, or contracted by small businesses.

It's important to note that even non-employers (solopreneurs) are crucial in helping to create these 160,000,000 jobs. Roughly 80% of entrepreneurs are solopreneurs, and given that the US has over 31,000,000 entrepreneurs, that means that over 25,000,000 million (or >15%) of all US job are self-employed entrepreneurs. Beyond this, as shown above, solopreneurs hire an additional 8,000,000 contractors, thus contributing to a potential total of 32,000,000 jobs in the US. So, even solopreneurs, help to generate substantial economic and job growth.

If we take a look at this graph above, this means that solopreneurs, as a group, generate roughly equivalent job opportunities, as entrepreneurs in the first three sub categories above combined! And all subgroups are comparable in productivity per captia to each other sub-group in the graph above. As firm size grows in the graph above, the subgroup as a hole adds about 25% more jobs to the workforce than it's smaller business counterpart. With job growth becoming exponential, relative to the number of businesses, in the 20-499 employee categories.

Let's take a closer look at these numbers. If every business in each of these categories employs the median number of employees in their respective category the number of employees is as follows:

Number of Small Business Employees Categorized by Firm Size:

0 Employee Firms: 25,000,000 Workers (data not included in the graph)

1-4 Employee Firms: 4,000,000 Workers

5-9 Employee Firms: 4,000,000 Workers

10-19 Employee Firms: 5,000,000 Workers

20-49 Employee Firms: 9,000,000 Workers

50-499 Employee Firms: 40,000,000 Workers

Total Employees in Small Business Firms: 87,000,000

Total and Comparisons:

Small Employer Firm Employees: 62,000,000

Large Employer Firm Employees: 67, 000,000

Public Employer Firm Employees: 25,000,000

Non-Employer Firm Self-Employed (Solopreneurs): 25,000,000

Contract Workers Employed by Non-Employers (Solopreneurs): 8,000,000

Contract Workers Employed by Employer Firms: 2,000,000

Estimated Total Employed Workers: 189,000,000(3*)

Total Recorded US Worker: 167,000,000

The key takeaways from these numbers are that: 1) they reinforce the initial claim that private entrepreneurs are responsible for a large majority (85%) of all jobs. 2) They show that small businesses and entrepreneurs account for up to 97,000,000 jobs in the US, equalling 50% of all jobs. 3) They show that solopreneurs account for 32,000,000 jobs (17% of all jobs). So solopreneurs, create nearly as many jobs as the largest small businesses, and more jobs than every other sub-group of small businesses combined. Solopreneurs also generate more jobs than the public sector. Further, they generate half as many jobs as all the mega-corporations like Walmart (whose revenue exceeds the GDP of several developed nations), combined!

So the underdogs, the solopreneurs, making under $50,000 on average, 50% of whom work a second job, are a force to be reckoned with in Job creation. This alone shows that even small-scale entrepreneurs are making a difference on a macro scale.

And this is only one area in which entrepreneurs are benefitting the world. Entrepreneurs also contribute to social equity, and in fact, Solopreneurs shine here as well. They operate the most socially equitable companies and have demographics that better match real-world demographics, and empower minorities better than their large-company counterparts. But this is a topic for the next article.

Take some time to look back over this article, and then stay tuned in the coming weeks for a new article where I'll make a case for socially equitable small business, and explore the data surrounding it!

*Notes:

1. Even though many large companies may be publicly owned, they were typically founded by entrepreneurs, who at first presumed risk. Most stats on entrepreneurs will focus on small businesses, LLC's, Sole Proprietors, etc. where the owner is still financially liable for the company. However as noted in my previous post, we are using a wider semantic range for "entrepreneur." One could also argue that many "entrepreneurs-at-heart" are behind the creation of public sector organizations and jobs as well. These people are sometimes called , "intrapreneurs."
2. It's difficult to know the true numbers of jobs jobs when we try to account contract employees, as stats are often taken from various forms, such as tax records, or firm reports, and these don't always match up. However, similar stats as shown for small firms are true of large firms, who contract 20-50% of their employees. Given the regulations of large firms reports, compared to many small firms (eg. LLC's), we can presume that most statistics have accounted for the contract workers among the job creation of large employers. However if not, its possible that large firms also create an additional 30-80 million jobs from contracting, however, again this is most likely reported and accounted for in most statistics.
3. This number is estimated based on the fig. 3, and is likely exaggerated because of that, plus the 10,000,000 contracted jobs may not be accounted for in the number of workers in the US, since these contracted workers may be employed elsewhere, or self-employed. Thus the extra 20,000,000 may be exaggerated, or may allude to the number Jobs created, rather than the number of workers employed.

Sources:

https://www.pewresearch.org/short-reads/2019/08/29/facts-about-american-workers/#:~:text=More%20than%20157%20million%20Americans,assembly%20lines%20and%20checkout%20counters.

https://www.pewresearch.org/social-trends/2015/10/22/three-in-ten-u-s-jobs-are-held-by-the-self-employed-and-the-workers-they-hire/

https://www.americanprogress.org/article/understanding-the-self-employed-in-the-united-states/

https://www.fedsmallbusiness.org/survey/2023/report-on-nonemployer-firms

https://www.nuwireinvestor.com/one-sixth-of-business-owners-work-a-second-job/#:~:text=October%2029%2C%202013-,A%20recent%20survey%20of%20small%2Dbusiness%20owners%20has%20found%20that,business%20to%20make%20ends%20meet.