Small businesses create virtually all new Illinois jobs – Illinois Policy

Report on Small Business Contributions to Sustainable Development Goals in Illinois

Executive Summary: Small Enterprises as Key Drivers for SDG 8 (Decent Work and Economic Growth)

This report analyzes the critical role of small businesses in Illinois, particularly in the context of achieving the Sustainable Development Goals (SDGs). The findings indicate that enterprises with fewer than 50 employees have been the exclusive source of net job creation since 2020, positioning them as essential contributors to SDG 8 (Decent Work and Economic Growth), SDG 1 (No Poverty), and SDG 10 (Reduced Inequalities). Their performance highlights the necessity of a supportive policy environment to sustain this contribution.

Analysis of Job Creation and its Impact on SDG 8

The data underscores the profound impact of small businesses on employment, a core target of SDG 8. Their contribution to job creation since the onset of the pandemic has been unparalleled.

1. Exclusive Job Creation: Firms with fewer than 50 employees are responsible for the creation of over 174,000 jobs on a net basis since early 2020.
2. Role of Micro-Enterprises: Businesses with fewer than 20 employees have been the primary engine of this growth, creating over 172,000 jobs, which constitutes 99% of the total from the small business sector.
3. Stagnation in Larger Firms: In contrast, firms of all other sizes have not yet returned to pre-pandemic employment levels, collectively remaining more than 66,000 jobs below their early 2020 figures.
4. Comparative National Reliance: Illinois demonstrates a significantly higher dependence on its smallest businesses for job creation compared to the national average. These firms accounted for 99% of post-pandemic job growth in the state, versus 81% nationwide.

Contribution to SDG 1 (No Poverty) and SDG 10 (Reduced Inequalities) through Wage Growth

Beyond job creation, small businesses are making significant strides in promoting equitable economic outcomes through accelerated wage growth, directly addressing the aims of SDG 1 and SDG 10.

• Accelerated Wage Increases: Since the pandemic, wages at businesses with fewer than 50 employees have grown by an average of 30.6%.
• Outpacing Larger Corporations: This growth rate surpasses that of larger firms. Wages at companies with 50-499 employees rose by 28.7%, while those at firms with over 500 employees increased by 24.6%.
• Reducing Income Gaps: The stronger wage growth within the small business sector is actively closing the earnings gap with larger businesses, contributing to reduced income inequality. Since 2020, wages at small firms have grown 24% faster than those at the state’s largest employers.

The Role of Small Businesses in Fostering SDG 11 (Sustainable Cities and Communities)

Small enterprises are fundamental to building resilient and sustainable local economies, a key component of SDG 11.

• Community Economic Backbone: As consistent job creators, small businesses form the bedrock of local economies, enhancing community vitality and resilience.
• Supporting Diverse Local Employment: Their operational characteristics, including a higher reliance on part-time workers and a significant presence in rural areas, cater to diverse community employment needs and support local labor markets.

Policy Recommendations for Achieving SDG 17 (Partnerships for the Goals)

To secure and enhance the contributions of small businesses to the SDGs, a collaborative partnership between the public and private sectors is required, as envisioned by SDG 17. This involves addressing significant governmental and regulatory obstacles.

1. Acknowledging Systemic Challenges: Small businesses in Illinois operate within a challenging economic framework characterized by:
   • A state tax competitiveness ranking of 38th in the nation.
   • The third-highest state corporate income tax in the U.S.
   • High property and sales tax rates.
   • A punitive unemployment insurance tax structure.
   • A ranking as the fourth-most heavily regulated state.
2. Fostering a Supportive Environment: A strategic partnership between lawmakers and the business community is essential. Reforming the state’s tax and regulatory codes to create a more favorable environment for small businesses should be a primary objective.
3. Strengthening Economic Foundations for SDGs: Such reforms would empower Illinois’ most vital job creators, thereby strengthening the state’s capacity to achieve its sustainable development targets, particularly those related to decent work, poverty reduction, and economic growth.

Analysis of Sustainable Development Goals in the Article

1. Which SDGs are addressed or connected to the issues highlighted in the article?

• SDG 8: Decent Work and Economic Growth

  This is the primary SDG addressed in the article. The text focuses extensively on job creation, the economic contribution of small businesses, and wage growth within Illinois. It highlights that businesses with fewer than 50 employees have been the “sole job creators” since the pandemic, directly linking their performance to the state’s economic health and employment landscape.

• SDG 10: Reduced Inequalities

  The article connects to this SDG by discussing wage growth dynamics. It points out that wages at small businesses have grown faster (30.6%) than at larger corporations (24.6%) since the pandemic. This trend of “stronger wage growth among small businesses is closing this gap” between earnings at different-sized firms, which relates to reducing income inequalities among workers.

2. What specific targets under those SDGs can be identified based on the article’s content?

• Target 8.3: Promote development-oriented policies that support productive activities, decent job creation, entrepreneurship, creativity and innovation, and encourage the formalization and growth of micro-, small- and medium-sized enterprises…

  The article’s core argument is about the vital role of small businesses (fewer than 50 employees) in job creation. It explicitly states they created over 174,000 jobs and calls for policy reform (“Reforming Illinois’ tax code to foster a friendlier environment for Illinois’ small businesses”) to support their growth, directly aligning with this target.

• Target 8.5: By 2030, achieve full and productive employment and decent work for all women and men… and equal pay for work of equal value.

  This target is relevant through the article’s emphasis on both job quantity and quality. The creation of over 174,000 jobs by small businesses contributes to “productive employment.” Furthermore, the discussion of “impressive wage growth” at these businesses, which is outpacing that of larger firms, relates to the goal of “decent work” and fairer compensation.

3. Are there any indicators mentioned or implied in the article that can be used to measure progress towards the identified targets?

• Indicators for Target 8.3 (Growth of Small Enterprises):
  • Net job creation by firm size: The article provides precise data, stating that businesses with fewer than 50 employees created “more than 174,000 jobs” since the pandemic, while firms of all other sizes saw a net loss of over 66,000 jobs.
  • Proportion of job creation by small businesses: It is mentioned that businesses with fewer than 20 employees accounted for 99% of net job creation in Illinois since the pandemic, compared to 81% nationwide. This serves as a direct measure of their contribution.
• Indicators for Target 8.5 (Productive Employment and Decent Work):
  • Wage growth rate by firm size: The article specifies that since the pandemic, wages at businesses with fewer than 50 employees have grown by 30.6%, compared to 24.6% at firms with over 500 employees. This measures progress towards better pay.
  • Comparative wage growth: The text implies an indicator by stating that wages at small businesses are “rising 24% faster than wages at employers with more than 500 employees,” which can be used to track the closing of the wage gap.

4. Table of SDGs, Targets, and Indicators

Source: illinoispolicy.org