11/29/2024
Thank a small business on Saturday: they’ve generated all Illinois’ job growth
Small Business Saturday offers a reason to be extra thankful: businesses with fewer than 20 employees have been the only ones to grow payrolls since COVID-19 hit.
Illinoisans have an extra reason to “shop small” on Nov. 30, Small Business Saturday: “mom and pop” shops have been the engine behind the state’s job recovery from the COVID-19 economic downturn. They deserve a “thank you.”
Businesses with fewer than 20 employees have been the only firms to add jobs on net since the onset of the pandemic, accounting for the creation of nearly 110,000 jobs. Meanwhile, firms of all other sizes have yet to restore employment to pre-pandemic levels and remain more than 84,000 jobs below early 2020 levels combined, according to Census Bureau data.
In 2023 alone, businesses with fewer than 20 employees were responsible for creating nearly 31,000 jobs – 74% of the job creation in the state. The state’s largest businesses with 500 or more employees shed more than 17,500 jobs.
While small businesses have been responsible for virtually all net job growth in recent years, their contributions to the Illinois economy are nothing new. 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 312,000 – 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 lagged the statewide average and those of larger businesses. This hasn’t been the case in recent years. From 2023-2024, employee wage growth at businesses with fewer than 50 employees was 32% faster than the statewide average, or 3.8% compared to 2.8% statewide. This was higher than for employees of larger businesses. Average wage growth among firms with 500 or more employees was 3.6%, while businesses with 50-499 employees experienced no wage growth on average.
Since 2020, employees of businesses with fewer than 50 employees have seen average wages grow by nearly 27%, almost 11% faster than the statewide average for private-sector workers. Only employees of firms of 50-499 employees have experienced faster average wage growth, despite seeing no change in wages from 2023-2024. Employees at the state’s largest companies have seen the slowest average wage growth.
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.
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 37th in the nation – the second highest in the Midwest – according to the nonpartisan Tax Foundation. This is in large part because of the second-highest state corporate income tax in the nation, second-highest property taxes, seventh- 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.
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