Carol Roth: Small business is the 'Rodney Dangerfield' of the American economy (and that needs to change)

Small businesses have truly become the Rodney Dangerfield of the U.S. economy—while legendary, they “can’t get no respect.” Despite numbering 30.2 million strong, employing around half of the total the workforce and accounting for around half of the total sales in the U.S., the disparate size, ownership, industries and geographies of small business don’t give them enough clout when it comes to Washington and policy.

Given that small businesses are the backbone of the economy, that needs to change.

As we hear from politicians and activists on calls to raise the minimum wage for workers, why doesn’t anybody speak up for the small business owners? Entrepreneurs who start businesses risk their own capital, as well as their time and effort, and nobody guarantees their wages.

Who is speaking up to ensure that small business owners have the continued, appropriate incentives to invest in new and existing businesses? Making it harder for them to hire upsets the risk and reward equation that is critical to starting a business and successfully staying in business.


In fact, in municipalities like New York City that have had to deal with minimum wage increases, small businesses have been forced to cut hours and employees, raise prices and in some cases, close altogether.

For many small businesses, a new regulation can put them out of business.

It’s not just wage regulation, but all regulation, that excessively impacts small business. Whether it is the calls to regulate the technology sector or bills like the new “gig economy” legislation out of California that are sold under the guise of “beating up on big business” and being so-called worker-friendly, any regulation disproportionately hurts small business owners.

In fact, big companies secretly love regulation because regulations are in fact anti-competitive -- every new rule, law or compliance measure limits the ability of existing smaller competitors or new start-ups to compete. While big businesses can use their caches of cash to fund new people and procedures to deal with regulation, for many small businesses, a new regulation can put them out of business.


Even the 2018 tax cuts, which gave a series of tax breaks to corporations and individuals alike, favored big businesses over small businesses. Given restrictions on the types of businesses that could use the new, lower tax rate and other nuances of the law, most small businesses did not get the same level of cuts as their larger, corporate counterparts.

Not to say they didn’t get any, because the majority of Americans did, but it clearly put a delineation between smaller and bigger businesses, to the small businesses’ detriment.

As Dangerfield said, “it’s not easy bein’ me”—and it’s not easy being a small business owner. If we want to have a robust economy, we need to ensure that small businesses remain strong.

It is time that Washington remembers the little guys in business on whose shoulders the economy stands.

Carol Roth is the creator of the Future File legacy planning system, “recovering” investment banker and host of The Roth Effect podcast.