How Small Businesses Create Pathways to Quality Jobs for Low-Wage Workers
Research Report by Next Street, with support from The James Irvine Foundation
Small businesses are one of the most powerful drivers of economic mobility in the U.S.—and especially in California. With 4.3M+ small businesses representing 99.9% of all firms, they employ more than half of the private workforce and serve as critical engines of local economic growth and community stability.
But despite their importance, small businesses—and the workers they employ—face structural challenges that limit their ability to deliver quality jobs, sustainable growth, and long-term economic opportunity.
This report with support from The James Irvine Foundation and developed by Next Street examines the intersection of small business growth and workforce outcomes, with a focus on how to expand pathways for low-wage workers to achieve economic mobility through entrepreneurship and employment.
The Core Insight
Small businesses are essential—but under-resourced—to fully deliver on their potential as engines of economic mobility.
They create jobs and community wealth
They offer more flexible, equitable workplaces
But they often lack the capital, tools, and infrastructure to provide higher wages, benefits, and advancement opportunities
Top Line Takeaways
1. Small Businesses Power Economic Opportunity
Economic Impact: Over 4.3M small businesses in California employ 53% of the workforce (~8M workers) and drive local economic growth.
Job Creation: These businesses are essential engines of employment, community stability, and regional economic activity.
2. Low-Wage Workers Are Central to the Challenge
Workforce Reality: Approximately 4.3M Californians work in low-wage jobs, disproportionately impacting BIPOC communities and women.
Rising Expectations: Workers are increasingly seeking better wages, stability, and clear pathways to career mobility.
3. Financial Job Quality Remains a Constraint
Capacity Gap: Small businesses often lack the resources to offer competitive wages and benefits compared to larger firms.
Infrastructure Challenge: Limited HR systems and workforce investment restrict their ability to scale quality job offerings.
4. Strength in Non-Financial Job Quality
Workplace Advantage: Small businesses excel in culture, flexibility, and employee engagement.
Employee Experience: Workers often benefit from greater autonomy, purpose, and connection in small business environments.
5. Access to Capital, Customers, and Services Is Limited
Capital Barriers: Many businesses lack access to flexible, appropriately sized financing.
Growth Constraints: Challenges in reaching new markets and gaps in operational and financial capabilities limit scalability.
6. Industry and Business Model Shape Outcomes
Segment Differences:
Main Street businesses offer accessibility but operate with lower margins
High-growth firms provide higher wages but are less accessible
Supplier businesses show strong growth potential with variable job quality
7. Equity Gaps Persist Across the Ecosystem
Systemic Barriers: BIPOC- and women-owned businesses face ongoing challenges in accessing capital, networks, and growth opportunities.
Inclusive Impact: Despite these barriers, these businesses often deliver more equitable and inclusive workplace environments.
