AARP Eye Center
How Small Business Trends Influence the U.S. Older Workforce
By Jennifer Schramm, May 10, 2023 11:54 AM
Despite larger businesses increasingly dominating markets and employing more workers, small firms – where older workers historically have held a larger share of the jobs than they have at bigger firms – continue to be a vital employment source for those ages 50 and older. A new AARP Public Policy Institute Fact Sheet on 50+ workers in U.S. small businesses provides the details.
Still an essential source of jobs for older workers
Independent businesses with fewer than 500 employees – the U.S. Small Business Administration definition of a small business – have always been a major source of employment for workers of all ages, but particularly for older workers. U.S. Bureau of Labor Statistics (BLS) data show that in 2022, 24.2 million workers ages 50 and older were employed by firms with fewer than 500 employees, compared to about 19 million 50+ workers in firms with 500 or more employees. In addition, the share of workers ages 50 and older in comparison to other age groups is higher in smaller firms (34.0 percent) than in firms with 500 or more employees (30.0 percent). And in "microbusinesses," or firms with fewer than 10 employees, the share of employees ages 50+ rises to 38.2 percent.
How employment varies by age and demographic
For workers ages 50 to 64, the share of employment in small firms compared to large firms is similar among men and women, but after 65, the share of men working for small businesses is slightly higher. There are also some differences by race/ethnicity. For example, among the private-sector workforce under age 25, white workers are most likely to work for a small firm, but for those ages 25 to 49, and 50 to 64, Hispanic/Latino workers are most likely to work for a small business. In the 65 and older age demographic, multiracial and American Indian/Alaska Native, Native Hawaiian, and other Pacific Islander workers are most likely to work in small private firms.
Pandemic and economic-trend impacts: some positives
Because small businesses are an important source of jobs for older workers, changes in the economic environment that influence the ebb and flow of small businesses -- from formation and growth to layoffs and closings -- are also likely to affect the labor market experiences of older workers and jobseekers. An analysis of BLS data on business employment dynamics between 1994 and 2019 indicates that small firms' share in total employment has declined for most age groups during this period. However, while small-firm employment of workers ages 65 and older also declined during this time, it has recently begun to trend back up, though it is not yet clear why.
Economic conditions and trends will continue to influence older worker employment in small businesses. Meanwhile, many older workers start their own small businesses and will surely continue to do so. Though the business environment in the early months of the pandemic caused many small firms to close, by the second quarter of 2021 the economic outlook began to improve. In fact, in a hopeful sign, U.S. Census data showed applications for new businesses surged in the second half of 2020. In other good news for older entrepreneurs, research by the JP Morgan Chase Institute shows that small businesses with older owners are more likely to survive than companies started by younger founders.
For more jobs data: Find the latest employment data in the AARP Public Policy Institute's (PPI) Employment Data Digest, PPI's monthly review of job trends for those ages 55 and over. Visit the AARP website's work and jobs section for articles on work and unemployment and job search resources. Visit the lifelong learning section for education resources and research.