Where do you place your confidence?  Government, private business, newspapers?  Gallup has an annual Confidence in Institutions Index which has been tracking a very similar question back to the 1970s.  Today they released an update for July 2010.  While the headline numbers are mostly about confidence in Congress (ouch - 11 percent) and the Presidency (down 15 percent in a year), what always strikes me in this research is how difference small business and big business are rated.  In 2010, when asked "Now I am going to read you a list of institutions in American society.  Please tell me how much confience you, yourself, have in each one -- a great deal, quite a lot, some, or very little?," the second highest response in terms of confidence was small business with 66 percent while big business was scraping near the bottom with 19 percent confidence.

In a survey of youth in 2007 (and actually in earlier iterations), we ask a somewhat similar question, "How much do the following help make your community a better place?"  More details on the survey available online but I don't think we published these tables broadly.

	A lot	A little	Not at all
Small Business	32%	59%	9%
Big Business	22%	57%	22%
Government	19%	57%	24%
Individual People	55%	40%	5%

We are in the field with an update to this youth survey so we'll see how some of these things have changed among America's youth in the last three years.  In comparing the two questions and populations, it's interesting to see the only group the youth tended to have different views of in comparison to ther others is the role that individual people play in making their community a better place.  While I realize the phrasing of the two questions is different - confidence vs. making community a better place - I would argue that the two questions really are trying to get at similar things.  While Gallup doesn't include individuals in their categories (as they really aren't institutions), it looks to me on reading that some of the confidence that adults might have in small business is really a confidence in the power of individuals.  Additionally, it looks like the conception of small business being different from big business is something which must emerge after youth.  

I had a great conversation with Carol Corrado at the Conference Board last week in the neighborhood of this topic that was sparked by a Business Week article and some responses from colleagues/grantees at Kauffman.  I'm not going to jump into that full discussion but the thing I did want to raise with my post here is that there is no doubt that both small and big business play important roles in the U.S. economy, indeed wealth creation can only come through private businesses.  Carol's point, I think, was that we really don't have a fully-conceptualized picture of the roles, particular how big business is often supportive of small business.  I won't dispute that (and I hope our data infrastructures and conceptualizations can continue to advance so that these questions can be quantified).  But the polling continues to show the picture people get when thinking about the little guy is very different than when thinking about big business. 

As a follow-up to my post yesterday on current trends in entrepreneurship in the U.S., I wanted to highlight another new report available - the Survey of Business Owners (SBO) 2007.  While this is not a particularly timely report, it is a deep report, bringing us our best snapshot of U.S. businesses by demographic once every five years.  While the SBO has a varied release schedule for reports with many more forthcoming, what came out recently was new data on ownership by gender and race.  My reaction to the report would fall very close to my colleague Alicia Robb's, which was summarized in a recent Business Week article - it's great to see some growth in the numbers of businesses but extremely troubling to see where the growth is occurring and the many areas of continued lag.


Source: http://www.businessweek.com/smallbiz/content/jul2010/sb20100716_503885.htm

This graphic from Bloomberg captures two things in particular 1) we are seeing growth in numbers of minority businesses, almost all in non-employer businesses and 2) the growth in minority-business ownership is dwarfing growth in non-minority firms.  BUT staggering levels of discrepancy in terms of lacking larger minority-owned businesses remains mostly intact.  In other work from the Kauffman Index, we have shown that the nature of those entering entrepreneurship has changed greatly in the last decade, partly by propensity and partly by changing population demographics.  The SBO report doesn't get into the changing population demographic, which I suspect is driving the change in the Hispanic numbers in the report but can't be seen as a driver of the large increase in Black-owned businesses.

As for trends with women-owned businesses, in 2007, there were 911,285 women-owned employer firms with 7.6 million persons employed and total payroll of $218.1 billion.  This is an increase of 6.2 percent and 25.7 percent respectively from 2002. This compares to 3.2 million men-owned employer firms that employed 41.6 million persons with a total payroll of $1.5 trillion.  I hate to be a pessimist but given how integrated, educated, and a part of all economic life that women are today, these are numbers that have to change faster.  There is no reason we should still be seeing women's employer businesses averaging 8 employees while male-owned firms are averaging 13 employees.

The Census Bureau now has within its grasp the data infrastructure to produce annual data updates on these statistics of business owners by demographic.  It absolutely should do so.  Without more frequent updates on these trends I fear efforts to create more minority and women's employer businesses will never gain traction.  There remains a great deal of untapped economic potential in the disparate levels of minority and women's businesses. 

The Challenger Job Market Index, a quarterly survey of approximately 3,000 job seekers, was out today with some new info on 2010 transitions into entrepreneurship.  It is surprising in that it reports a sizable decline in entry into business ownership in the first half of 2010, with only 3.7 percent of their sample opting to start their own business (down from 7.6 percent in the first half of 2009 and 9.6 over the last two quarters of 2009).

The natural question here is what does this all mean when put up to other statistics currently available?  Certainly a decline like this is not a positive development since it shows about the lowest rate of start-up activity in this survey since Challenger began collecting it (see related post by a colleague showing historic trends).  But at a time when job seekers are seeing record lengths of long-term unemployment and are likely very financially constrained, I can’t say that I am entirely surprised to see a decline in the percentage of the unemployed who are seeking other forms of employment besides starting their own business.  I think the press release from Challenger rightly identifies some of the opportunities this group might be facing as hiring has eased with existing employers and things like the credit crunch in lending. 

But do we expect to see a drop of half in the rate of new business formations in 2010?  No.  The latest data we have from the Kauffman Index which goes through December 2009 shows increasing rates of households reporting entry into entrepreneurship and as we’ve been documenting in other recent reports, many rates of entrepreneurship seem to be extremely steady.  What I wouldn’t be surprised to see in new data coming out on 2009 and 2010 is a moderate decline in employer business formations.  I expect these declines looking at trends from the Bureau of Labor Statistics or other not yet published leading indicators collected by the World Bank.  But a 50 percent decline has never been seen in government data collected on this topic in the United States. 

There is little doubt that when taken on the whole that there is an increase in necessity entrepreneurship and a possible decline in opportunity-driven entrepreneurship in the U.S. currently.  We’ll continue to look into these things more in the coming months in new papers in our Kauffman series on this topic, but the real question which we can’t answer currently is if there are new transformational companies being born today, as my colleague Dane Stangler has shown has occurred in past downturns. 

I’ll just end with a call for all my federal statistical agency colleagues to redouble the effort to get some more timely indicators on new business formation.  BLS currently leads the way with their BED and CPS-based statistics but I know Census is considering some new monthly measures and I suspect something similar might be possible at BLS.