New Studies Reveal 5 Reasons Policymakers Should Prioritize Local Business in 2016

It's the season of resolutions, and a raft of recent research suggests that creating a better environment for locally owned businesses to succeed ought to be at the top of every public official's list of priorities. The findings come from prominent economists, sociologists, and other researchers, and suggest that small, local businesses are critical to overcoming many of our biggest challenges, from reducing economic inequality to building resilient communities.

In this article, the Institute for Local Self-Reliance rounds up the new studies and what they say about why local business should be a focus of planning and economic development in 2016.

1. Fewer new businesses are starting, and that's bad news for long-term job creation.

Employment is finally on the rebound, but high rates of underemployment and minimal wage growth suggest all is not well in the U.S. job market. One disturbing trend may be to blame: the creation of new businesses has fallen sharply. While startups accounted for 16 percent of all businesses in the late 1970s, that share has fallen by half, to 8 percent, explains a new brief from the Kauffman Foundation.

The brief also explains why that’s so troubling. The authors round up the recent research on firm age and job creation, and find that young firms are the major contributor of new jobs to the U.S. economy. “New businesses account for nearly all net new job creation and almost 20 percent of gross job creation,” they write, adding, “companies less than one year old have created an average of 1.5 million jobs per year over the past three decades.” While no one is certain what’s caused the drop in new businesses, the same policies and conditions that have made it harder for small, local businesses to succeed may well be impeding new entrepreneurs.

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