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Why small businesses really matter

Restaurants amid COVID-19 restrictions easing, in Ann Arbor
Reuters/Emily Elconin
Small businesses bring people together, even in a pandemic.
  • Tim Fernholz
By Tim Fernholz

Senior reporter

Published Last updated on

There’s one wrinkle when it comes to boosting small business: In general, they aren’t very efficient.

At least on some metrics: Small businesses tend to pay their employees less, provide them less generous benefits, and offer fewer opportunities for advancement compared to larger enterprises. Small businesses aren’t as productive as big businesses—it’s called economy of scale for a reason. Heck, most small businesses don’t even last that long.

Why, then, would we want to encourage more smaller enterprises that don’t pay workers as much or produce things as cheaply as bigger ones?

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