How Did Small Business-Owning Households Fare 

During the Longest U.S. Economic Expansion?

By George Haynes, Montana State University, Bozeman, MT 69715; and Charles Ou, U.S. Small Business 

Administration, Office of Advocacy. 2006. [29] pages. Under contract no. SBAHQ-03-M-0274

This report was developed under a contract with the Small Business Administration, Office of Advocacy, and contains information 

and analysis that was reviewed and edited by officials of the Office of Advocacy. However, the final conclusions of the report do not 

necessarily reflect the views of the Office of Advocacy.

During the 1990s, the U.S. economy enjoyed 

its longest expansion on record. U.S. household 

income and wealth rose significantly during this 

period. This report examines how households that 

owned businesses fared during this boom period. 

Were they well-represented in the high earnings 

and high net worth categories? Did their wealth and 

income grow faster or more slowly than households 

that did not own businesses? Did their share of 

wealth and income rise or fall? This study uses the 

Federal Reserve Board’s 1992 and 2001 Surveys of 

Consumer Finance to explore these trends over the 

period 1992-2001.

Overall Findings

The authors found that households owning small 

businesses were more likely to be found in the top 

echelons of income and wealth than households that 

did not own a business. However, over the course 

of the study period, the likelihood of being in the 

high income and high wealth category increased at a 

faster rate for non-business owning households than 

for households with small businesses. In addition, 

small business owners saw their share of aggregate 

household wealth decline from 42.5 percent in 1992 

to 40.6 percent in 2001.

Highlights

• Business-owning households remained significantly more likely to have high incomes and high 

net worth than households not owning businesses. In 

2001, small business-owning households were more 

than twice as likely to be classified as high income 

(57.1 percent versus 25.5 percent) and more than 

eight times as likely to be classified as high wealth 

(21.2 percent versus 2.5 percent) as households not 

owning a business. Households that owned more 

than one business had the highest probability of 

being classified as high income (67 percent) and high 

wealth (38 percent).

• By 2001 the wealth and income gap between 

households with and without businesses had narrowed. From 1992 to 2001, the likelihood of being 

in the high-income or high wealth category increased 

at a faster rate for households without a business 

than for households that owned small businesses. 

For households without small businesses, the chance 

of being in the high income category increased 42.5 

percent and the chance of being in the high net worth 

category increased 92 percent; for small businessowning households, these figures were 24.7 percent 

and 61.8 percent, respectively.

• For all households, aggregate income increased 

by 29.5 percent and aggregate wealth by 71.0 percent 

over the period 1992–2001. Small business-owning 

households realized higher percentage changes in 

aggregate income than non-business-owning households (31.5 percent versus 23.6 percent). Multiple 

business-owning households realized the largest 

increase in aggregate income (45.2 percent) of any 

group. On the growth in wealth, aggregate wealth 

increased slightly more for households that did not 

own businesses (a 68.3 percent rate of growth for 

non-business owners versus 63.5 percent for business owners). Of the three groups, households with 

multiple businesses experienced the smallest rise in 

aggregate wealth, 54 percent.

• In 1992 high income households were more 

likely to be headed by a well-educated, married 

male, 35 to 54 years of age. The household was 

more likely to own public stock. Households owning a sole proprietorship were less likely than those 

owning a regular corporation to be high income. A 

June 2006 No. 276
somewhat different picture emerges for 2001. The 

head of the high income household was more likely 

to be between 45 and 54 years of age, married, the 

owner of public stock, with employees, and having 

acquired his business by buying it. Most importantly, 

households owning one or multiple businesses were 

equally likely to be high income households in both 

years. In 1992 high wealth households were typically 

headed by older individuals with public stock holdings. These high wealth households owned larger and 

older businesses and were more likely to own multiple businesses. In 2001 the age effect was still present, owners were well-educated, and they were still 

likely to hold public stock. Households owning sole 

proprietorships were less likely to be millionaires 

than households owning regular corporations. In 

addition, these wealthy households typically owned 

larger and older businesses, and they were more 

likely to own multiple businesses.

Methodology

Data from the 1992 and 2001 Surveys of Consumer 

Finance are the main sources used in this study. 

This study continues a topic examined in an earlier report, Wealth and Income: How Did Small 

Businesses Fare from 1989 to 1998, prepared by 

George Haynes under contract to the U.S. Small 

Business Administration (www.sba.gov/advo/

research/rs205tot.pdf). Like the previous study, the 

variables of interest include each household’s business ownership status, income, and wealth (including 

assets and debt held by members of the household). 

Different categories of businesses were identified: 

self-employed business owner/managers with one 

or no employees; small business managers who are 

owner/managers with more than one employee; angel 

investors who are business owners with no active 

management responsibilities in any business; and 

other angel investors who are primarily owners with 

other investments where they provide some management support.

This study is primarily descriptive, using family income and wealth to compare business- and 

non-business-owning households. The probability 

of being classified as high income or high wealth 

by each group is estimated: real mean income and 

wealth were compared and the share of each group 

in the total family income and aggregate wealth in 

both years were estimated for comparison. Logistic 

regression models are used to assess the types of 

households and business owners more likely to be 

classified as high income or high wealth. This study 

uses non-linear logistic regression models to predict 

the likelihood of high family income or wealth from 

binomial classifications of high income (yes/no) and 

high wealth (yes/no).

This report was peer-reviewed consistent with 

Advocacy’s data quality guidelines. More information on this process can be obtained by contacting 

the director of economic research at advocacy@sba.

gov or (202) 205-6533.

Ordering Information

The full text of this report and summaries of other 

studies performed under contract with the U.S. Small 

Business Administration's Office of Advocacy are 

available on the Internet at www.sba.gov/advo/research. 

Copies are available for purchase from:

National Technical Information Service

5285 Port Royal Road

Springfield, VA 22161

(800) 553-6847 or (703)605-6000

TDD: (703) 487-4639

www.ntis.gov

Order number: PB2006-104809

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