America’s industrial transformation needs a Marshall Plan for small businesses and their workers

There’s broad agreement on at least one thing about this year’s election outcome: Americans want more good jobs and an affordable cost of living, especially for working families. A question now emerges: Can our nation’s leaders leverage a budding industrial renaissance that hinges, far more than we recognize, on the capabilities of America’s small businesses and their workers? 

Ahead of a major political transition, the American economy is already at a crossroads. The new Trump administration will inherit the most expansive portfolio of federal investments in the U.S. economy in more than half a century. Spurred mainly by the Infrastructure Investment and Jobs Act, CHIPS and Science Act, and Inflation Reduction Act (all of which relied on or have now gained vocal bipartisan support), these investments aim to renew our country’s infrastructure and domestic manufacturing across a wide range of sectors. This new “industrial policy” mobilizes trillions of dollars in public funds and is expected to stimulate an additional $1 trillion in private capital investment over the next decade. 

Not since the Cold War and the Space Race has our government and the private sector made such big bets to advance national security and economic competitiveness. And the opportunity for American industry is indisputable: Soaring investments in infrastructure, manufacturing, and emerging technologies are turning into contracts and employment, particularly among small and midsized companies. 

American companies such as GM and Micron, along with leading foreign-owned businesses such as Honda, have announced plans to invest billions of dollars in new or expanded factories across the United States. This is part of a larger shift as multinational companies move production stateside, motivated by public incentives, geopolitical risks, and more U.S.-centered trade policies and tariffs. As reshoring accelerates and the infrastructure boom unfolds, there is high demand for small and midsized businesses supplying goods and services in our nation’s critical supply chains. 

These long-awaited investments and subsequent demand also represent a catalyst to rejuvenate local economies—especially in legacy industrial towns in the South and Midwest that have struggled for decades. Recent research by the Brookings Institution and the Massachusetts Institute of Technology shows that public and private investment in “strategic sectors,” such as next-generation batteries and computer chips, is flowing disproportionately to economically distressed counties—a break with the pattern of the past several decades, in which a handful of winner-take-most regions claimed an absurdly outsized share of America’s economic growth from innovation. 

But to realize the promise of the industrial transformation, we must now mobilize the country’s small business sector to build the capacity essential for globally competitive domestic supply chains and good jobs for American workers. 

As a recent analysis by the McKinsey Global Institute reported, small and midsized businesses “employ nearly six in ten workers, produce almost 40% of value added nationally, and grow into a meaningful share of very large corporations.” Companies with fewer than 500 employees have also created an estimated two-thirds of new jobs over the past 25 years and contribute to nearly 50% of U.S. industrial and manufacturing production. 

Additionally, small companies account for a higher-than-average share of jobs in economically disadvantaged metro area and rural communities. Through the jobs they create, small businesses offer workers entry into career pathways by fostering more flexible workplaces and closer management-employee relationships than the typical large employer. Diverse-owned small companies also lead the nation on inclusive hiring—a key tool for raising the country’s chronically low labor force participation. 

Small businesses, however, need modernized support to meet the industrial demands of the moment. U.S. small businesses have been less productive than larger companies and small firms in other advanced economies, due to the challenges our small businesses face in accessing capital, management expertise, and sales channels required for growth—not to mention critical investments in skilled workers and quality jobs. These companies have also struggled to recruit and train skilled workers to adapt to evolving markets.  

Small firms are especially undervalued and overlooked in the national conversation on good jobs and the business strategies that center them. According to leading-edge research, such strategies promote higher productivity, reduce employee turnover, and create more satisfied customers. Yet entrepreneurs in highly competitive supply chains have incentives to limit training investments and keep their wages down, for fear of being undercut by lower-cost rivals.  

The lesson is clear: America needs a “Marshall Plan for Small Business” that invests in the business capacity and workforce critical for the biggest industrial transformation of our time. 

This plan should center on three pillars. First, we should establish results-driven national programs that prepare small businesses to navigate evolving market conditions. Small companies need guidance, for example, to assess macroeconomic trends and develop strategies for emerging industry opportunities. These firms also need support to adapt their products and operations to optimize production, adjust to shifting trends, and enter new markets. 

There are working examples of this and how it pays off. The Advanced Mobility Supply Chain Transformation Center at the University of Michigan offers consulting and training for small manufacturers to adapt to changes in automotive supply chains. Similar programs in New York, Texas, and other states help small construction contractors understand and seize opportunities in clean energy infrastructure. We need to scale and spread these effective but mostly local, small-scale programs nationwide. 

Second, we need a new workforce development approach centered on small businesses that is equipped to mobilize the American workforce on an industrial scale. Small businesses need to hire and train skilled workers across a range of occupations, from manufacturing technicians to engineers, electricians, and coders. A large body of evidence shows that these occupations—some of which do not require a college degree, let alone a four-year or more advanced degree—are projected to offer higher wages, lower barriers to entry, and greater job mobility that fosters pathways to the middle class. 

Industry-workforce partnerships that build in-demand worker skills in exchange for job quality commitments among employers are proving themselves in multiple states and industry sectors. Examples include Manufacturing Works in Ohio, a first-of-its-kind multistate agreement to build electric buses for local transit agencies, and the Department of Commerce’s recent investments in industry clusters and tech hubs in struggling regional economies with high potential. 

Third, we need small business financing programs and products crafted for firms in critical industrial supply chains. Their capital needs are very different from those of a neighborhood restaurant or personal care business. Small businesses will need financing—both debt and equity—for working capital, R&D, and workforce investments. Some will need financing to form joint ventures or acquire businesses with complementary capabilities. 

On this front too, we’re not starting from scratch. Public-private collaborations such as AM Forward leverage existing Department of Defense and Small Business Administration programs to enable large companies to effectively invest equity in small manufacturers in aerospace and defense supply chains. The Department of the Treasury’s expanded State Small Business Credit Initiative is stimulating private lenders to invest in small industrial companies at an estimated $10 of private money for every $1 of taxpayer money. Manufacturing “conversion grants” from the Department of Energy are filling financing gaps for small businesses retooling operations for new industries. 

In the year ahead and well beyond, the outlook for the U.S. economy is massive, continuous change. But there’s no reason small businesses should bear the brunt of the shocks or miss out on transformative opportunities. What’s more, their workers will be critical to unleashing the full potential of America’s industrial transformation and deciding whether it delivers good jobs, not just bigger profits. It’s time we invested accordingly.