Abstract
This article not only acknowledges that the wage and wealth gap is an issue larger than the scope of the following research, but also endeavors to begin foundational conversations in order to assist small business owners. This article will delve into surveys received from 11 small business owners around the country, offering solutions and concluding with the impact small business owners can make in addressing the wage and wealth gap. Many in the United States are considered to be within the poverty level, and many of those individuals are working for larger corporations who do not pay enough per hour to adequately support their employees. Quotes and credible statistics will be used throughout the article to portray the opportunity small business owners have in order to help those who are poverty stricken today, and ultimately the local economy.
Income inequality is present and active in the United States. The United States is often considered the land of opportunity, but is this truly a place for the majority to achieve success and fulfill one’s dreams? The wealthiest 10% of Americans made approximately nine times as much as the rest of the population in 2015. 1 Often the rich continue to get richer in the United States. One must consider how this is affecting the rest of the population. How is this affecting the 39.7 million people in the United States who are considered to be within poverty range? 2 What are the reasons for income inequality and what can people do about it? More specifically, can small business owners make an impact on the wage and wealth gap in the United States?
The largest employer in the United States is Wal-Mart with 1.3 million employees. 3 Many consider Wal-Mart’s wages too low, especially when compared with the fourth largest company in the United States, IBM. 4 One might question how the national hourly wage is $23.24 (March 2019) when such a large population are employed at Wal-Mart getting paid minimum wage or slightly over. 5
A total of 58.9 million people (47.5% of the private workforce) were employed by small businesses in 2015. 6 Additionally, over the years small businesses are closing their doors less and less. According to the Small Business Administration, approximately 80% of small businesses continue after their first year, with around 50% continuing past their fifth year. 7 Even though these percentages have increased, it is still beneficial to continue to research ways in order to help small businesses be successful and outlive this 5-year time span that half typically cannot overcome.
From the Small Business Owner
The definition of a small business according to the Small Business Administration is “an independent business having fewer than 500 employees.” 8 An analysis was conducted on 11 small business owners in five different states, in various industries, with a diversity of owners (diversity in gender, age, race, ethnicity and education level), with employee bases ranging from 1 to 120 and length of business from approximately 2 to 41 years. The purpose of this research was to receive additional perspective from people in the industry on how the small business owner is able to address the wage and wealth gap in this country.
Before delving into the present themes, the simple yet straightforward questions that were asked are helpful to direct this discussion:
How can small business combat income inequality?
How can smaller businesses increase the buyers’ awareness of this issue?
How can your business address the wage and income gap as your business grows and what would facilitate this process?
With a significant population employed by large corporations who are getting paid near-minimum wage, and with many of those large corporations using overseas services and products to lower prices that local services and products cannot compete on cost, what can the small business do to combat this problem? With the select few accruing income far greater than the many causing a significant portion of our population to be under the poverty line, what can the small business do to combat this problem?
A few issues must be stated that the small business cannot do and that includes changing government regulations and creating equal pay for everyone. Both of these issues will not be addressed because both are not within the reach of the small business owner or the scope of this research. This study is a collection of statistics and percentages, with real small business owners, with practical steps toward making a difference to those who are most affected by this gap.
How Can Small Businesses Combat Income Inequality?
Path for Advancement
Everyone wants to know that there is a potential for growth, that they will not become stagnant at their place of employment. They want a clear path of how to increase in knowledge, prestige and ultimately pay. Of the respondents who made a statement along this theme (Path for Advancement) to combat income inequality, they believed that it is important to have “raises based on time with our company, hours put in and ability to complete tasks,” pay “increases based on performance,” “a clear path for advancement,” pay “based on merit and skill,” business “model based on experience and education” and “pay raises as a reward for their progress.”
The average working American can increase their skill, the hours put in, their education and so on to increase their level and pay at their place of employment. This is not the rich getting richer, this is the average working American closing that gap just a little more. Twenty-five percent of Americans make less than $10 per hour and the top 1% make 20% of the income in the United States. 9 As small businesses create opportunities for growth, especially for those who are currently making less than $10 per hour, which for a household of three is considered below poverty level, 10 they will create more income for them and ultimately raise the local economy.
Wages
More than half of the small business owners surveyed specifically mentioned higher starting pay or wages in general. A difficult balance is present with small businesses concerning paying higher wages. Several respondents discussed this balance of bringing in enough wealth to distribute it, but one said, For small businesses it’s a little more challenging because they are operating their business on a shoestring. I decided to start at the beginning of our business paying my staff what I thought was on the high side of the wage bracket. . . . Start out at $15 per hour so that they develop a standard of excellence. By doing it that way I’m able to use pay raises as a reward for their progress. Artists that are making their top wage, that’s one less thing I have to worry about—I am paying my people well.
This owner recognizes the difficulties often present of working on a limited budget, but this owner also realizes it is an investment in the business, the people, and time. Time in the sense that there is not a concern of losing and searching for people on a continuous basis.
Additionally, on the topic of increasing pay to all employees as the business becomes more profitable, one owner wrote, “It increases the businesses’ ability to attract new employees, and it closes the gap more than increasing only the higher paid employees.” Small businesses need to realize that it is important to not only attract new employees but also keep them. They ought to keep this wage and wealth gap in the forefront of their minds as they are determining entrance wages, benefits, and a plan of action as the business grows.
Additional Notes
Several additional comments were made that are worthy of further exploration; however, they were not categorized within a theme. The first comment was about creating more small businesses. “Helping create not only employees but helping others to create small businesses themselves.” With almost 50% of the U.S. workforce in small business and the increasing desire within the population to purchase from local businesses, helping create additional small businesses has a potential to help that individual and the local community. Ninety percent of Americans shop at small businesses at least once a week and 91% of those small businesses give back to their community. 11 Small business owners are able to give financially into the community, but also by helping others start small businesses of their own, they are able to make a greater impact. They are able to do this by increasing local business growth, which creates potential for those businesses to give back to their community as those in the community support them.
This point connects with the next highlight, which is a higher level of transparency. “Letting people know and see some of the process. Really doing what small businesses do best; being part of their community, being personal. And most importantly providing quality.” Local businesses should play on their strengths; they are part of the community, and therefore, they ought to be involved in the community. Community support will increase business, which will increase the bottom line, allowing those businesses to provide quality employment to others.
The last noteworthy point outside the themes drawn is more so an overall statement concerning this gap. One business owner wrote, Also small business IS by nature closing the gap. As small business owners take risk and branch out, they are no longer hourly earners, and *hopefully* their income grows and they fill in that gap between hourly earners and the mega rich.
How Can Smaller Businesses Increase the Buyers’ Awareness of This Issue?
Increasing awareness among clients concerning one’s business and their investment in the local community, done effectively, will often increase sales/services. The following are two quotes concerning this topic from the small business owners surveyed.
Helping the consumer understand it’s not just about consumption but it’s also about building the overall economy because it’s to their advantage that the overall economy gets built, it helps them as the economic situation becomes more robust as well. We invest our money in local entrepreneurs, small businesses, and our people. We love our city and we understand that shopping downtown is investing in Fayetteville as a city. We try to remind our clients of this daily.
Conversely, several respondents either were not sure how to increase buyers’ awareness of this issue or did not believe it was needed for their small business. A survey conducted by UPS identified that 94% believe that doing business with small local businesses is important, and 90% believe that these small businesses are crucial to the U.S. economy. 12 With these types of percentages, this is an opportunity for locally owned small businesses to increase their income by spreading awareness of the impact small business has on the community and how customers are helping impact others, yet it is important to realize that this is easier for certain types of businesses compared with others. It is easier to focus on how a local artisan at a retail store is able to give back to the community compared with a photography or medical practice small business.
How Can Your Business Address the Wage and Income Gap as Your Business Grows and What Would Facilitate This Process?
Increasing Opportunities
For small businesses to address this gap, they must increase opportunities for profit such as “driving sales,” “creating positions” and “working more jobs,” as respondents wrote. A small business owner ought to be looking for opportunities for their business and for their people to grow. Some opportunities for the employees would include “providing health insurance, apprenticeships, continuing education opportunities are all good paths for the future.” Concerning driving sales, one business owner wrote, “If we want to see change, we all need to be voting with our dollars. Where we choose to spend our money matters.” This is a good question for one to reflect on. As owners and supporters of small businesses, where do they spend their dollars? Are their actions reflecting what they are asking others to do?
Research
It is critical for business owners to know their market and the typical wage. How can an owner know where they stand if they do not know what their national competitor is paying their employees? In the beginning it may not be realistic to have competitive pay rivaling today’s mature and thriving organizations. However, what positives do these smaller business have compared with the larger corporations? What type of incentives can be offered?
Smaller businesses often have the competitive edge on flexibility; they can shift and change much quicker than a larger corporate company. The smaller business often does not have as many levels to go through to get an answer for a large decision. Professor Patricia Greene of Babson College discusses how small business owners are the leading innovators in the United States as she discusses some results from the data collected from Goldman Sachs 10,000 Small Businesses. 13 This report “summarizes the progress of approximately 6,000 small business owners who have completed the program across the United States.”
Small-business owners don’t necessarily use the word innovation with regard to their business activities initially; however, they enthusiastically describe innovation as a means of standing out from competition. Our in-depth discussion reinforced the notion that while small-business owners may not realize the extent of their innovation activities, they are certainly innovating in important ways that match the early entrepreneurial foundation of business innovation.
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Small business owners are often innovators, and this is how they can stand out and continue to thrive in such a changing environment.
Investment
Two business owners discussed the importance of investment. One provided the suggestion to multiply money through investment, and the other, to help spawn other businesses to create their own wealth—“as the economy develops they develop.” As these individuals’ businesses grow, they see an opportunity to help diminish this gap by investing in others and the community. However, for these new small businesses to succeed, they need knowledge and a good foundation to avoid becoming part of the 50% of small businesses that close their doors within 5 years of opening. Their investors ought to not only give financially but also share their knowledge of how to have a successful business.
Beginning Solutions
Solutions are needed today to help more small business owners become successful. The research above is a start to developing solutions for addressing the wage and wealth gap. Many more solutions will be offered and more extensive surveys will be conducted, yet the purpose of offering these beginning solutions is to offer steps for current and future business owners.
Various circumstances will greatly affect the success or failure of one’s business; some circumstances cannot be predicted, yet others are predictable and valuable for life lessons. Themes previously drawn from the group of small business owners have revealed points to reflect on and learn from. Therefore, below are condensed, practical points to what has been researched and delved into in the above research.
Research Information concerning market, typical wages, economy and much more is readily available. Lack of information is not a problem; lack of initiative, discipline and, at times, humility is often the culprit. “The willingness to engage in constant self-examination—both as individual leaders and as an organization—is vital to maintaining success.”15(pp. 65-66)
Sell Sell your products and services. Would you purchase your own products and services? The answer should be yes. If not, what makes you think others want it? Sell your mission, your vision and your purpose. Others will be aware if your lifestyle encourages what you are trying to represent. People want genuineness, and if people do not see that you are genuinely sold on your own purpose they will not want to support your business. This does require discipline and hard work though. “Higher standards are hard to maintain. It requires the discipline to constantly talk about and remind everyone WHY the organization exists in the first place. It requires that everyone in the organization be held accountable to HOW you do things—to your values and guiding principles. And it takes time and effort to ensure that everything you say and do is consistent with your WHY. But for those willing to put in the effort, there are some great advantages.”16(p. 147) Sell being part of the business. If you are not able to pay enough or offer good enough benefits or good enough reason to be a part of your purpose, there will be much turnover and it will be difficult to create the climate that small businesses often thrive off of—the idea of family and the feeling of being part of the community, not above or beyond it, which is ultimately, relationships.
Invest Invest in your business, in others and in the community. This correlates with the last point, with a main strength of small businesses being relationship oriented. It is important to invest in those relationships and to push others not only to make an impact in your own business but also be part of pushing the economy toward lessening this income gap by creating their own businesses as well.
Make a difference This last point is a mixture of several previous points but should still be focused on here. Be real, be you, and make a difference! Not everyone is going to want to save the whales, and if only 1% of your profit goes toward that cause, you probably are not interested either. Be passionate about what you do, and go 100% toward that goal. Do not try to make a difference just to make a difference, but really make a difference, and how it appears is often unique from one business to another.
There is opportunity! Research—50% of small businesses still are running after five years (see Figure 1). These owners have a 50–50 chance, and what will often make that difference is to prepare oneself adequately. Sell—94% of people believe that doing business with small local businesses is important. People, in general, are rooting for small business. So sell your mission, your vision, and your why, and people will be there to buy your products (or services) and buy your vision. Invest—90% of Americans shop at small businesses at least once a week. Opportunity for investment is gargantuan. Invest in smart businesses and in passionate, strategic people. Make a difference—25% of Americans make less than $10 per hour. At this rate, those people are often considered poverty stricken; make a difference and invest in the local economy by supporting businesses and people within it.
Small Business Beginning Solutions.
Creating Real Impact
The purpose of life is not to be happy. It is to be useful, to be honorable, to be compassionate, to have it make some difference that you have lived and lived well. (Ralph Waldo Emerson)
Everyone wants to live a life of impact, whether that be the student who was the first in his or her family to make it to college, the single-mom who provides for her kids, the small business owner who has a successful business or a number of other ways to make an impact. One way to create real impact is to make a difference in where it matters the most to the individual. Passion and drive will take an individual far, but what will take that drive even farther is some discipline and research. Small business owners should have a passion for their business and to make an impact in the community (whether that be through giving back to the community or through stirring the economy within the local area). Small business owners should have a passion for excellence, because in this world of change and constant advancement, excellence is what will keep the customers coming back. Moreover, small business owners should have a passion to create real impact—to make a difference, to make a lasting footprint for today and the many tomorrows that will come.
Desire is the key to motivation, but it’s determination and commitment to an unrelenting pursuit of your goal—a commitment to excellence—that will enable you to attain the success you seek. (Mario Andrett)
Footnotes
Acknowledgements
Thank you to every small business owner who participated in this study—it could not have been completed without you. Additionally, thank you to Terri Crowther who ensured my thoughts and words were communicated effectively and to Nick Ertel who continuously pushes me to pursue excellence.
Declaration of Conflicting Interests
The author declared no potential conflicts of interest with respect to the research, authorship, and/or publication of this article.
Funding
The author received no financial support for the research, authorship, and/or publication of this article.
