AI adoption drives small business hiring despite $200bn regulatory threat
Small businesses utilizing artificial intelligence are expanding their workforces rather than cutting them, but experts warn a fragmented state-level regulatory approach could cost the sector $200 billion over the next decade.
Witnesses told the House Small Business Committee this week that AI adoption is actively driving small business hiring, pushing back against fears of widespread job displacement.
According to Jordan Crenshaw, senior vice president at the U.S. Chamber of Commerce’s Technology Engagement Center, 58% of small firms reported using generative AI last year, up from 40% in 2024 and 23% in 2023. Crucially, 82% of small businesses that reported using AI increased their staff headcounts over the past year. “These businesses are not using AI to replace people,” Crenshaw said. “They’re using it to help employees focus on high value work that requires judgment, creativity and relationships.”
The operational impact is already evident across various sectors. Anthony Qaiyum, owner of Chicago-based Merz Apothecary, told lawmakers his company increased its staff by 20%, from 50 to 60 employees, since deploying the technology. The firm relies on AI to analyze cash flows, track inventory, manage payroll, and automate routine accounts payable.
This automation frees approximately 20 hours per week for a single employee, redirecting their time toward strategic growth. In the retail sector, a Detroit coffee company used AI to refine product pricing and expand its marketing footprint. France Hoang, founder and CEO of AI firm BoodleBox, noted this strategy lifted average orders from $38 to $47.
Chike Aguh, head of innovation and strategy at the Kapor Center, advised business owners to view AI as a force multiplier for unaddressed operational gaps, such as building a web presence or handling back-office accounting, rather than a direct substitute for existing staff.
However, access to the most effective tools remains uneven, creating a potential investment divide. “Basic AI is cheap and it is everywhere,” Hoang said. “The premium AI that delivers real results still costs money, and a new divide is opening up between Wall Street and Main Street.”
For investors and executives, the broader macroeconomic risk lies in regulatory fragmentation. Crenshaw warned that without federal intervention, a state-by-state patchwork of rules will impose severe compliance costs on smaller firms that lack the legal resources of large corporations.
Citing a study by the Information Technology and Innovation Foundation, Crenshaw noted that the absence of national AI data privacy rules could cost the U.S. economy roughly $1 trillion over the next decade. Small businesses would absorb an estimated $200 billion of that burden.
Compliance costs are already materializing at the state level. Crenshaw estimated that adhering to the AI provisions of the California Consumer Privacy Act will cost a small business $16,000 annually. Several committee members indicated a willingness to establish a national regulatory framework and fund AI literacy programs through the Small Business Administration, though no legislation advanced during the hearing.
