WASHINGTON, D.C. – Does small business ownership help increase a household’s overall well-being? One way to look at this is to examine how the income and wealth of households owning small businesses changed in the most recent economic expansion and recovery period. That task was undertaken in a study just released by the U.S. Small Business Administration’s Office of Advocacy.
“The report released today finds that households owning small firms in the 1998-2007 period were more likely than other households to be in the top 50 percent in income and wealth,” said Susan M. Walthall, Acting Chief Counsel for Advocacy. “It will be important to continue to examine this data series to assess the well-being of small businesses in the current economic environment.”
Income and Wealth: How Did Households Owning Small Businesses Fare from 1998 to 2007? by George W. Haynes, updates previous Advocacy-sponsored studies and is based on additional data from the 2007 Survey of Consumer Finances. Household income is the sum of wages, salaries, interest, dividends, asset sales, rents, and other income sources. Household wealth is estimated by generating a balance sheet subtracting total liabilities from total assets. Findings include the following:
Households owning any business were significantly more likely to be high income earners in 2007 than in 1998; the largest percentage gain was among owners with more than one business.
In the latter part of the period—between 2004 and 2007—the likelihood that households owning a small business had a high income increased by 4.2 percent and the likelihood that they had a high level of wealth increased by more than 20 percent, compared with increases of 2.1 and 5.2 percent, respectively, in households not owning businesses.
The characteristics of households and businesses were somewhat different in 1998 than in 2007. By 2007, high income households were headed by younger people, while higher wealth households were headed by older people.
From 1998 to 2007, households not owning a business increased real mean wealth by just under 40 percent; the comparable increase for those owning a small business was 63.4 percent.
For a copy of the study, visit the Office of Advocacy website at www.sba.gov/advo.