The Truth Behind America’s Small Business Boom: Opportunity or Necessity?
Small businesses are often celebrated as the backbone of the American economy, fueling innovation, creating jobs, and turning dreams into financial independence. Politicians from both parties cite record-breaking business creation as proof of a thriving economy. In fact, more than 5.5 million small business applications were filed last year double the level seen before the pandemic. But behind the headlines, the surge tells a more complicated story.
Why Small Business Creation Matters
Owning a business has long symbolized the American Dream. Beyond cultural importance, small businesses employ millions and often act as incubators for groundbreaking products and services. Having a record number of new businesses should, in theory, mean more jobs, more innovation, and more prosperity. Yet, a closer look reveals that much of the increase is tied to economic struggle and the rise of the gig economy rather than genuine entrepreneurship.
The Surge in Applications And What’s Driving It
Many of the new registrations come from lower-income states and suburban counties where rent is cheaper and remote work has created opportunities for people to strike out on their own. On the surface, this looks like entrepreneurial energy. In reality, many of these ventures are born from necessity. Households facing higher costs of living and stagnant wages are turning to gig work or side hustles simply to make ends meet.
The gig economy plays a huge role in the numbers. Today, 36% of the American workforce participates in gig work. Each new Uber Eats driver or freelance delivery worker counts as a “business,” inflating application figures without adding the stability or job creation that traditional businesses provide.
The Challenges of Gig Work and Independent Contracting
Gig jobs are flexible, but they often lack security, benefits, and fair pay. Workers operate like employees—bound by company rules and even non-compete agreements yet without health insurance, retirement savings, or legal protections. This shift has allowed companies to lower labor costs while transferring risk onto workers. The result? Growing job insecurity, financial instability, and a workforce vulnerable to economic shocks.
Why the Data Is Misleading
Government agencies often misinterpret the wave of applications as proof of a booming entrepreneurial economy. But in many cases, these are not storefronts or companies hiring teams they are individuals signing up for gig platforms. Research shows that counties with higher new business creation also experience higher job destruction, meaning new ventures are replacing old jobs rather than adding new ones. Programs highlighting minority business loans or support may be celebrating numbers that reflect gig registrations, not sustainable small businesses.
Policy Shifts Needed for Real Growth
If policymakers want to support true small business creation, structural reforms are essential. Proposals include:
- Banning non-compete agreements that trap workers in low-paying jobs.
- Expanding access to retirement savings options for independent workers.
- Improving healthcare access for those without employer benefits.
Without reforms, platform companies will continue benefiting from a system that incentivizes temporary, insecure work, while workers and communities shoulder the burden.
The Bigger Picture
The record-high number of business applications is not the clear sign of economic strength it first appears to be. While some entrepreneurs are building genuine businesses, millions more are simply navigating a system where gig work is the only option. The challenge and opportunity for policymakers and investors is to separate true business growth from inflated statistics and ensure that the American Dream of business ownership remains more than just a line on a government chart.
All writings are for educational and entertainment purposes only and does not provide investment or financial advice of any kind.
