Here’s why the economy is failing and how we can change it

Photo credit: Timothy Neesam via Flickr

At any given time, I can open a social media newsfeed and see the battle between entrepreneurs and middle class workers, both calling the other stupid. Some entrepreneurs can’t figure out why people would actually work for others and some middle class workers can’t figure out why entrepreneurs would take the risk they take.

Here’s the problem with all the bickering, with the economy the way it is we need the entrepreneur to continuously generate product ideas and the middle class workers to keep working. “Support small businesses”, is not just a cliche. There are quite a few reasons why you should support small businesses. In a Gallup Killing Small Business report, from December 2015, it states that small business startups are on the decline.

Some of the reasons why small businesses are falling; are due to employee retention, customer retention, keeping up with competition, being unable to receive funding, government regulations and more. Most small businesses say that the constantly changing government regulations are their biggest hurdle.

Here’s what’s really happening behind the scenes and how we can change things

Fewer Jobs are being created

While big businesses are important for food chains, small businesses are generating most of the jobs for the middle class workers. According to Small business Administration, 65% of new jobs are created by small businesses. If new jobs are not being created we will continuously see higher unemployment rates. Which also means that less middle class workers are spending money to help boost the economy. Make no mistake, we definitely need their money in this economy.

Based on the “Killing small business” report:

1. A real turnaround would require 10 million new good jobs. The percentage of full-time job holders in the U.S. population needs to move from 48% to 52%. Five million new good jobs would be a good start. Ten million — the turnaround we need.
2. A middle-class job is one with full-time hours with an employer of any size and a regular paycheck. A middle-class household is one with income roughly between $55,000 and $85,000. Middle-class jobs and households are the heart and soul of America and are now in decline as a percentage of the total adult population.

GDP is on the decline

GDP also referred to as Gross Domestic Product, is the way we determine if the economy is thriving. Startups are known for innovation and entrepreneurship. As the goal of many startups is to solve specific “on-demand” issues that some big companies are not solving. If fewer small businesses are starting up and shooting up, we are losing out on innovation and products that are in customer demand. As well as products that could solve new problems. Based on the “Killing small business” report:

1. GDP growth is the most important metric to watch for rebuilding the middle class. GDP is the sum of all sales and production of everything we buy and sell and make. If America were a company, our sales (GDP) would be $17 trillion, with right at 100 million full-time employees.
2. Worldwide GDP is $78 trillion. America’s share of the world’s economy has been about 25%, which has made it the dominant leader of the world. That leadership is in decline.
3. America’s GDP has to grow at a minimum of 2.5% or we go broke.
4. We have been running at an average rate of 2.0% since the financial collapse of 2008. So it is failing.

How we can change today

While we are battling trying to figure out who’s right and who’s wrong, we are working our way into another recession. We need more understanding and less judgement. Most important we need to lift up our lower middle class. As everyone needs our help. We need a more of a hands on deck approach. We need to fix our educational systems as well as support our entrepreneurs more than we do now. If we have friends and family members who are generating business ideas or have started a business, if we believe in them we need to share their product and their content. We shouldn’t just sit back and assume they are fine. While innovation and entrepreneurship is exciting it can also be lonely and discouraging at times. In order for us to help get this economy back on track we need to put all ego’s aside and get back to business.