By Vidhan Rana

According to the Edward Lowe Foundation’s website,, the number of self-employed people in the United States has increased from approximately 2.2 million in 1993 to 7.8 million in 2008, an increase of over 250 percent. In that same time period, however, the number of Americans employed at large companies (Stage 4 companies – or those with more than 500 employees) has decreased from 15.8 million to 13.6 million, or 14 percent. This trend has repeated itself in almost all the geographies around the country.

The growth of Stage 1 companies, or those with between two and nine employees, is equally remarkable, rising from employing roughly 23 million people to approximately 39 million people from 1993 to 2008.

What many people may be surprised to learn is that Stage 2 companies, those with between 10 to 99 employees, accounted for 35% of the nation’s employment in 2008– the largest among any group identified by the Edward Lowe Foundation.

The picture below shows how the overall employment in the United States has changed over the last two decades:

This trend can be observed across the country in an even more dramatic fashion. Whittaker Associates created a sample of 15 metro areas for which to conduct this analysis. We selected five metro areas each among high, mid and low ranked cities from the Forbes Magazine’s Ranking of Best and Worst Places for Business and Careers 2010. The following metro areas were chosen for analysis:

The following Motion Chart depicts how the 15 metro areas compare with one another.

Tips on how to use the motion chart properly:

  • Make sure the Size option on the right hand side is set to Population.
  • Set the y-axis to either per-capita income or unemployment rate.
  • For x-axis select one of the option that give you the percentage of labor force.
  • For the color variable on the right-hand side, select the Forbes Ranking
  • Hit the play button to see the motion chart in action (to change the speed of the motion chart, adjust the play speed to the right of the play button.

What you will notice among the 15 metro areas is that the total population that is self-employed rises in all metro areas. In the case of Stage 1 and Stage 2 companies, their share of employment rises more impressively in cities ranked higher by Forbes as the best place to do business. Many Midwestern cities, which are mostly relegated towards the bottom of the ranking, are usually concentrated more on the large companies (Stage 3 and Stage 4 companies) even though its share of the city’s employment is declining rapidly.

What city leaders and economic development officials need to recognize is that the economic picture has changed significantly in the United States. Large companies are not the primary job creators any more. Cities that are doing well (i.e. growing in population and economic prosperity) are those that provide equal, if not more, attention to the small businesses.

Review the change in employment by establishment size in the slides below. You can can click the play button and navigate the slides to view information about different cities. To view the images in full size, click on the images to view them on Picasa.