Small Business Saturday gives Illinoisans another reason to be thankful: these businesses have been the sole job creators since 2020.
Illinoisans will have an extra reason to “shop small” on Nov. 29, Small Business Saturday: “mom and pop” shops have long been the key driver behind job growth in the state, but since the pandemic they’ve been the sole creator of new jobs.
They deserve a “thank you.”
Businesses with fewer than 50 employees have been the only firms to add jobs on net since the onset of the pandemic, accounting for the creation of more than 174,000 jobs. Of those, 99% – or more than 172,000 – have come from businesses with fewer than 20 employees.
Firms of all other sizes have yet to bring their employment back to pre-pandemic levels. They remain more than 66,000 jobs below early 2020 levels, according to Census Bureau data.
This trend continued last year as businesses with fewer than 20 employees added more than 19,000 jobs – 89% of the jobs created in the state. Firms with 50-249 employees were the only other segment to add jobs, gaining just over 2,400.
The state’s largest businesses, with 500-plus employees, shed more than 11,000 jobs. All other groups saw minor declines in employment.
Illinois’ small businesses have been crucial for job growth across the state but their vitality becomes even more apparent when you compare them to the national average. Nationwide, businesses with fewer than 20 employees have been responsible for 81% of job growth since the pandemic. In Illinois, the figure is 99%.
Across the nation these businesses created 58% of the new jobs last year, but in Illinois that figure was 89%. To frame it differently, Illinois is 53% more reliant on small businesses for job creation than the rest of the nation, highlighting the importance of these job creators to the state’s economy.
While small businesses have been responsible for virtually all net job growth in recent years, their contributions to the Illinois economy are a long tradition. In the decade prior to the pandemic, small businesses were the leading job creator in the state.
Businesses with fewer than 50 employees were responsible for 64% of the state’s job growth. Businesses with fewer than 20 employees alone created 57% – nearly 314,000 – of the net new jobs.
What is a new development for Illinois’ small businesses and their employees is the impressive wage growth they have experienced in recent years. Historically, wage growth among small businesses has significantly lagged the statewide average and those of larger businesses.
This hasn’t been the case in the years since the pandemic. In fact, employees of small businesses now see their wages rising faster than larger businesses, according to data from the Bureau of Labor Statistics.
Since the pandemic, wages at businesses with fewer than 50 employees have grown by 30.6% on average. Wages at firms with 50-499 employees have risen by 28.7%, and for those with more than 500 employees wages have risen by 24.6%.
While total annual earnings at small businesses remain below that of larger businesses, much of this can be attributed to the characteristics of small businesses and their employees. Small businesses are far more reliant on part-time workers, more likely to be in rural areas and are more commonly service-based.
Still, stronger wage growth among small businesses is closing this gap. Since 2020, wages at small businesses have grown 8% faster than the statewide average and are rising 24% faster than wages at employers with more than 500 employees.
Illinois’ smallest businesses have proven to be among the most resilient and consistent job creators in the state for more than a decade. They are now delivering some of the strongest wage growth, despite facing massive governmental obstacles.
Illinois’ state tax competitiveness ranking is the lowest among all neighboring states at 38th in the nation – the second highest in the Midwest – according to the nonpartisan Tax Foundation. This is in large part because of the third-highest state corporate income tax in the nation, highest property taxes, eighth-highest combined state and local sales tax rate and one of the most punitive unemployment insurance tax structures in the nation. Illinois is also the fourth-most heavily regulated state in the nation, according to the Mercatus Center at George Mason University.
Just like the state’s shoppers should thank their local retailers this Small Business Saturday, politicians should do the same. Reforming Illinois’ tax code to foster a friendlier environment for Illinois’ small businesses should be a top priority for lawmakers when they return to Springfield after the holidays.
