How Much Small Businesses Contribute To Your Neighborhood vs. Amazon

Mature man making and shaping a surfboard in his small business surf shop.
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Although half of the stuff in your house probably came from Amazon, 99.9% of all businesses in America are small businesses. Even so, the big corporations are so big that all those small businesses still account for less than half of the country’s total private-industry jobs — 47.3%, to be exact.

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Related: How To Keep Supporting Your Local Small Businesses During COVID-19

That means that a tiny sliver of giant corporations and tens of millions of small businesses provide about the same number of jobs — but which one is better for the towns, cities and communities that those businesses call home? GOBankingRates conducted its own research and consulted experts from a variety of fields to find out. 

See: Small-Business Ideas for a Post-Pandemic World

The Line Between Big and Small Business Is Getting Blurry

Small businesses are great for local economies, according to Business News Daily, and that’s good news — the last few years and decades have witnessed a sharp increase in new small businesses.

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A lot of that small-business growth, oddly enough, has been thanks to big business. Giants like Facebook and Google have put powerful advertising, marketing and research tools within reach of the common person. Companies like Amazon, Etsy and UPS gave sellers platforms that exposed their products to the entire world with the ability to ship anything anywhere.

“Small businesses are getting more common these days with the rise of e-commerce and cheap or completely free marketing channels in the form of social media,” said Mladen Maksic, SEO consultant and CEO at Play Media

That, however, doesn’t mean that small businesses and giant corporations like Amazon don’t play different roles with different outcomes in communities across the country.

Discover: Kidtrepreneurs: 5 Kids Who Started Small Businesses

Small Businesses Create Higher-Paying Jobs

Business News Daily cited research from Penn State in reporting that — across America and across all industries — small businesses tend to create jobs that pay more than large, non-local corporations.

That dynamic, however, might be shifting. Thanks to expanded unemployment payments and lingering virus-related trepidation, a brutally tight labor market has businesses competing for limited talent. As big corporations raise wages to lure new workers, small businesses with much tighter labor budgets are now struggling to keep up. That’s bad news for communities across America. Small-business jobs, after all, provide much more than just comparatively high salaries. 

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“Local employment is great since it limits the amount of time employees spend traveling and commuting to work,” said Chris Taylor, marketing director at Profit Guru. “Small enterprises provide tax revenue, which is then re-invested in the local economy, resulting in a more prosperous community. This implies that your school districts, police departments and other small businesses and organizations will form a support network and benefit from one another’s efforts.”

Find Out: How Small-Business Struggles Hurt All Americans

Small Businesses Are Money Magnets — Corporations Are Vacuums

At least as important as the jobs small businesses provide is the fact that they tend to redistribute more money back into local economies than big corporations. Chain stores, on the other hand, are designed to suck money out of the towns they adopt and send it back to headquarters, wherever that may be.

“Large businesses tend to depress local economies by siphoning away more wealth than they’re contributing,” Maksic said. “The money that the local people will spend far outweighs the wages that the mega-corporations pay to a small group of employees that they hire in the area. It’s important to keep in mind that most employees of large companies are often located outside the state, let alone your city or town. In that way, they’re actually detrimental to the financial well-being of local neighborhoods.”

Read More: 22 Side Gigs That Can Make You Richer Than a Full-Time Job

Then There Are the Big Contributions That Can’t Be Measured

Target and Walmart chose their locations based on in-depth market analysis. Small businesses, on the other hand, are located where their owners live. They have real skin in the game — and it shows.

“As a small business owner, I focus heavily on contributing to my community,” said Andrea McFarland, CEO of 61 Marketing. “I’ve recently launched a local networking group. Members serve one another through business referrals, education and inspiration. I also frequently offer complimentary marketing consulting to local businesses and nonprofits who are just starting out. I find that investing in my community always comes back to me in future business.”

Read: Small-Business Industries Hurt Most by the Pandemic

Those kinds of intangibles — intense local commitment and community investment — make small businesses the arbiters of local culture, heritage and flavor. Communities lose something undefinable when the only options are Walmart and Dollar General, no matter how much money you save at the sales.

“Being located in a rural community, small businesses are a primary contributor to our local economy,” said Matt Pasut, president of CR Creative Co. “During the pandemic, many families turned to Amazon and other big-box and online retailers for products that local businesses simply couldn’t provide due to regional lockdowns and closures. As restrictions begin to lift, the resurgence of ‘buy local’ is stronger than ever as everyone understands that these local organizations are the lifeblood of the community. From sponsoring local sports teams and events to hiring local friends and relatives, the small-business community will continue to be the main artery of the local economy, leaving little room for mega-corporations to maintain the market share they were able to temporarily overtake.”

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Last updated: June 14, 2021

About the Author

Andrew Lisa has been writing professionally since 2001. An award-winning writer, Andrew was formerly one of the youngest nationally distributed columnists for the largest newspaper syndicate in the country, the Gannett News Service. He worked as the business section editor for amNewYork, the most widely distributed newspaper in Manhattan, and worked as a copy editor for TheStreet.com, a financial publication in the heart of Wall Street's investment community in New York City.

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