I’m on a prediction kick right now. I predict the survival of the middle class in the US is dependent on small business. I say this for several reasons. Here’s the list:
- More and more corporations are hollowing out their innards to foreign outsourcing. It is the constant chase for cheaper labor. However, places like India are moving up the labor stack. It used to be simple call centers, but now, as noted in this article by Heather Timmons called Cost-Cutting in New York, but a Boom in India, it is now research assignments that newly hired MBA graduates used to do. I don’t see this trend reversing, maybe slowing at times. And as I’ve noted in another entry called Are Indian Companies Expanding Too Quickly? these same Indian companies will outsource part of the work that can be done cheaper elsewhere (say Mexico). And the cycle will continue based on quality products/services and the underlining education that accompanies it.
- The wealth in the US is like the universe, it is expanding at the top end faster and faster, leaving everyone else behind. With the focus on the bottom line being self fulfilling, many companies are starting to ignore the social contract (Eastman Kodak for example) with the workers. This results in the rich getting richer and the rest getting downward trending purchase power because now they have to buy their own health insurance, life insurance, and other benefits.
- Business patriotism is gone. Being a US based company no longer resonates with corporate leaders. At one point being a US branded company meant something – maybe it was greater quality or superior technology. It is now sentimental like lemonade stands and baseball cards.
Now here are the reasons I think small business is the only way to save the middle class in the US:
Bullet 1 – With outsourcing becoming so prevalent, it makes the gears of business easier to access for everyone, especially those in small business. Now small business owners can either be an outsourcer or an outsourcee.
Bullet 2 – With the social contact once offered by big business being disbanded it no longer motivates the everyday Joe to work for corporations. If a worker has to pay for their expensive insurance situations then they might as well increase their benefit from the profits. The risk associated with being a small business owner doesn’t become riskier. It becomes riskier to be an employee of big business.
Bullet 3 – Lemonade stands and baseball cards still exist. That means there will always be a place for niche opportunities. Some will be sentimental while others will be proximity or relationship based.
Small business owners will adapt a smaller nimbler strategy where they tap many other small businesses. They will financially benefit from it and increase their buying power again. They will market themselves as someone just like you, well because… they are just like you.