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Elaine Edgcomb

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What Does Coffee Giant's Initiative Mean for America's Micro Businesses?

Posted: 11/02/11 12:31 PM ET

With (seemingly) a Starbucks on every corner, the Starbucks Opportunity Finance Network "Create Jobs for USA" initiative is designed to offer all of us an opportunity to become job creators.

But how does our $5 donation bracelet help change unemployment in the United States? Starbucks has partnered with the Opportunity Finance Network, an association of Community Development Financial Institutions (CDFIs) -- nonprofit loan funds, credit unions, private-sector banks and other financial intermediaries that are, as the Association reports it "dedicated to delivering responsible, affordable lending to help low-income, low-wealth, and other disadvantaged people and communities join the economic mainstream." Our dollars, and $5 million contributed by Starbucks, will go to these locally-controlled CDFIs, which, in turn, will channel the money to aspiring entrepreneurs seeking capital to start small businesses, and small business owners looking to grow and hire.

But will this make a difference? Although the US Small Business Administration defines small businesses as those with 500 or fewer employees, what we at FIELD at the Aspen Institute know best is the microenterprise sector those small mom and pop shops with five or fewer employees. According to the Association for Enterprise Opportunity, there are 25.5 million microbusinesses across the U.S., and FIELD's data suggests that they can indeed, contribute to reducing our jobs deficit. In 2010, we helped 21 microenterprise development programs (like the CDFIs designated for Starbucks support, and which assist microentrepreneurs with financing, training and technical assistance) collect data on a random sample of their clients. We provided data collection tools, guidance, data cleaning and analysis services to the programs to ensure a rigorous approach to tracking outcomes. Clients reported on their business experience in 2009, which was on average, 1.5 years from when they first approached the programs for services. Here is what we found:

• Net New Job Creation. 805 businesses added a net of 588 paid workers, representing an 86% increase in the net number of workers. (Some workers lost their jobs as 25 small businesses closed; lost jobs are subtracted from the paid workers count.) Just over half, 54% of the new workers were added by existing businesses that approached the programs for help. Only 28% of the new businesses created during 2009 hired workers, and yet they accounted for 46% of the new jobs.

• Paid workers are receiving competitive wages. Paid workers received median wages of $11, and mean wages of $15.80. However, under half, 44%, of paid workers were working full-time at the business. For the others, the wages were likely an important contributor to household income, but not household-sustaining on their own. Nevertheless, among existing businesses, the number of full-time jobs increased 66% while part-time jobs increased only 25%. This may suggest that a set of businesses, with the right financing and other support, can become engines of greater job creation. Other FIELD research found that businesses that were still connected to microenterprise programs five years after they first received services reported a 155% increase in their number of paid workers. (Many of these businesses had received a loan from the program, suggesting how important the Starbucks loan capital can be.)

• Business owners also paid themselves. Microenterprise business owners create paid jobs for themselves as well as others. 53% of business owners reported taking income from their businesses (either in the form of wages or an owners' draw), and the median and mean hourly income taken was reported to be $12.02 and $16.19. It's worth noting that in some instances, owners paid workers and not themselves, which may suggest that owners are deferring compensation as they work to build or sustain their enterprises.

While not all microbusiness owners generate jobs besides their own, supporting different segments of the small business community pays off. When things get stuck in Washington, an entrepreneurs' bold move to perk-up job creation provides a welcome relief.