U.S. small-business owners face weaker mobility than prior generations

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U.S. small-business mobility decline

Highlights

Small-business owners report inflation, rising operating expenses, and saturated markets are eroding the personal wealth-building seen by prior generations.
Historic small firms like M&S Schmalberg face significantly higher costs, with factory rent now $15,000 per month versus $420 in 1965, constraining real profitability gains.
Small Business Administration data from April 2024 shows over 25% of U.S. firms are family-owned, but generational mobility has declined, with only half of today's children out-earning their parents versus 90% in 1940.

Cost pressures reshape family business economics

As first reported by CNBC, owners of multi-generational small businesses say inflation, higher operating expenses and saturated markets are making it harder to build more personal wealth than earlier generations did.

Starr Hutchings Purdue, who co-runs Hutchings Funeral Home in Macon, Georgia, says the business no longer offers the same financial mobility it gave prior generations of her family. She says the funeral home, founded in 1910 by her great-grandfather, now operates in a more competitive and expensive industry, forcing closer control of spending.

At New York City's M&S Schmalberg, fourth-generation co-owner Adam Brand says the 110-year-old custom fabric flower business is in a boom period and has posted a modest profit for three consecutive years. Even so, Brand says his income does not stretch as far as his father's did, while factory rent has climbed to about $15,000 per month from $420 in 1965, or roughly $4,500 in today's dollars after inflation adjustment.

Arizona-based Serrano's Mexican Restaurant faces a similar squeeze. Ric Serrano says annual minimum wage increases, combined with softer consumer spending, make it extremely difficult for the chain to remain profitable, and the business now operates two locations, down from eight at its peak in the late 1990s and early 2000s.

Broader implications for the American Dream

Dan Wadhwani, an entrepreneurship professor at the University of Southern California Marshall School of Business, says the pattern reflects a wider shift in which some small-business owners struggle for upward mobility in ways previous generations did not. He points to inflationary pressure, economic uncertainty for customers and crowded industries as key obstacles, adding that businesses with less access to generational wealth or outside investment can be pushed aside.

Data cited in the story shows family firms still hold a meaningful place in the U.S. economy. More than a quarter of all U.S. firms were family-owned as of 2021, according to Small Business Administration data published in April 2024, while a 2025 Family Enterprise USA survey finds nearly a third of active family businesses have passed full or controlling ownership to the next generation.

Research from Harvard University's Opportunity Insights suggests the mobility challenge extends beyond entrepreneurship. Its findings show 90% of U.S. children born in 1940 earned more than their parents in adulthood, compared with half of modern-day children.

Not every family business is falling behind. David Judson, the fifth-generation head of Los Angeles-based Judson Studios, says he is living better than his father did after expanding the stained-glass company into contemporary art and public partnerships and changing its tax structure to save money. Still, Wadhwani says that if entrepreneurship delivers less socioeconomic mobility, the cultural force of the American Dream weakens with it.

In our earlier coverage of the Employment Cost Index’s 50-year milestone, we explained how the ECI tracks changes in U.S. wages, salaries, and benefits while avoiding distortions from shifts in the employment mix. The data showed compensation costs have risen sharply over the past five decades, with private-industry wages and salaries up 573% from 1975 to March 2026 and employer benefit costs also posting long-run gains.

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