Skip to comments.Small businesses are not our economic backbone
Posted on 07/20/2012 7:20:04 AM PDT by Sir Napsalot
I like small businesses. I like medium-size and large ones too. I like em all, and while size matters small firms face different, and often more challenging, hurdles than large ones I fear we risk systemic distortions if our policies are too dependent on firm size.
But arent small firms the job creators? As Ive stressed before, not especially, despite the fact that you hear this mantra hourly from policymakers of both parties. Some new data on private sector employment by firm size from the Bureau of Labor Statistics is especially revealing.
The first figure, from the BLS link above, just shows the time series in jobs by firm size, with the three size classes in the new series as 1-49, 50-499 and 500+: so small, medium and large. Over the full period the average shares for each dont change much: 29% of jobs are at small firms, 27% at medium, and 45% at large. Theres been a small shift a few percentage points from medium to large since 1990, but the small shares have been roughly constant at 28-29%.
So, the question is, do any of these size classes contribute disproportionately to job growth? In fact, they do, and the winner is not small firms. Whether in business-cycle expansions or the full run of these data, large firms 500+ employees contribute disproportionately to job growth. The small firms fewer than 50 workers in fact, contribute proportionately less than their share.
That may surprise you if youre used to hearing the opposite, which you hear a lot. Theres a reason for the different findings: establishments versus firms.
(Excerpt) Read more at salon.com ...
The full article is on Jared Berstein's blog On The Economy (2nd article as of today)
Er, and how did they get to be 500+ employee companies?
Jared Bernstein is a freedom-hating Commie who hates capitalism and America. Of course he hates small businesses. They are the lifeblood of our economy and of capitalism and our nation.
Jared Berstein is not someone I’ve ever heard of.
If I open up a restaurant with 6-8 employees, and call it the IzzyBurger, it's a small business.
If I open up a restaurant with 6-8 employees, and call it McDonald's, it's a large business.
How many of those 500+ firms were once 1 man, 10 man, 50 man firms?
Er, and how did they get to be 500+ employee companies?
You have to start big. All of a sudden you get 500+ employees from the start. You start with high market shares and expand./S
He is inventing a new catagory—medium. 55 % of all jobs are in companies with fewer than 500 employees. That has always been the standard for defining small business.
If that's true, then that shoots down the leftards' argument about why high-earners' taxes should be hiked.
Yeah, like Solyndra. :)
Besides ignoring the lifetime cycle of small business creating jobs, he makes another mistake in attributing job creation to small business. Most small businesses contract out the support they need rather than hiring employees. They will seek payroll services, bookkeeping, legal, advertising, printing, etc from other businesses. Indirectly, each small business is adding staff to other businesses. when the business gets large enough it will hire full time accountants, lawyers, marketing people, human resource people etc because it becomes cost effective. The small business is still creating jobs outside its 4 walls.
He is a small busness, a whore for Obozo.
While it is interesting, the article he wrote carrying water for Obama on the auto bailouts is pretty sad. The chart that he uses to make his point talks to all auto industry workers (about 2.4 million workers), yet he claims the bailout saved more than one million jobs. I think that claim is dubious at best, especially considering the vagueness of the chart’s data set. Based on that, I have a hard time believing the author isn’t at least intellectually dishonest.
Take away all those ‘small’ businesses and see how fast the economy collapses..
What a putz..
The numbers and ‘definition’ games Berstein played, he can make any claim he wants.
I wonder if Jared is cognizent of the reason that small business stops at 49 employees? (Cue the Jeopardy music)
It’s because labor laws in this country all kick-in as soon as you hire that 50th employee. At that point a business needs a full-time personnel director to keep track of the flood of government paperwork & regulations.
This is a serious distortion of our economic marketplace.
Behold the perversion of the self-acclaimed libtard economic “intellectual”, Jared Berstein. Typical anti-capitalist communist demonizing the capitalist system as a zero sum game... tell me economic “genius” Jared, how many companies strat out with 500+ employees, you ignorant $hit for brains moron?
>> 1-49, 50-499 and 500+: so small, medium and large
Go pound sand, jackass. 1-100 is small business.
These people are so dang conflicted. They hate the Walmart’s of the world because they drive mom & pop business out of business, but then enact or support those that enact policies that destroy small business. They really hate free enterprise, small or corporate.
Fascists prefer few, very large corporations that are easily and willingly controllable over many small scattered and uncontrollable businesses.
The large businesses willingly cooperate because of the carrot (regulation that keeps out competition) and stick (we’ll punish you if you don’t cooperate).
i think this could be construed as an "economic hate message".
These guys first three sentences all begin with the word I. The world revolves around the progresso.
spun off from a mega Corp. Sheesh. /s
Hmmm, let’s see.....HEWLETT-PACKARD STARTED IN A GARAGE, SO DID APPLE. Microsoft once had 10 employees. Albertsons was once a grocery store run by two brothers.
Point is, every LARGE corporation STARTED OUT as a SMALL corporation, because somebody took a risk..........
Liberals don not understand this because they are, by definition, risk averse. They want to take all risk away in every sector of life. Nature doesn’t work that way, and neither does business...........
Easiest way to own a small business in today’s economy... buy a big one and wait.
There is even a book on the subject explaining just how to do it. I have a copy from the 50's that is just as true today as when it was first printed. Very informative. You could even call it the Liar's Bible...........
Wanna buy some old GM stock?...........
What are those figures like if you eliminate the 1 person companies? If I own some apartment buildings and form a corporation (or even one corporation per building) to limit my legal liability, I am unlikely to hire a second person.
If I ran a small business, I would pay close attention to how many employees I had. Certain employee levels can trigger some expensive compliance issues, and add on additional HR regulations.
It’s much easier to exercise political control over a few very large businesses than it is to control thousands and thousands of Mom’n’Pops.
He just arbitrarily created a new “medium” classification to bleed numbers away from small businesses. Most have traditionally lumped what he calls “medium” in the “small” class and used two classifications: Large and small businesses.
The numbers and definition games
That is the name of the game today. They changed the way fat and obesity are counted by lowering the threshhold. They have revised the way they count mentally challenged people and suddenly we have an epidemic. I hate when they do this and I hate it more than people buy into it...
SO, Big Government / Big Business is Good
Small employers are unimportant
The same regulations are forced on both
Makes it near impossible anymore for the small guys to start a business, to grow it or to compete
I don’t like concentration of power, period, whether it’s in government or business.
Using Business Employment Dynamics (BED) dataset from the Bureau of Labor Statistics, there is a table which demonstrates average gross and net job gains at all private business establishments from the third quarter of 1992 through the first quarter of 2010.5 Over this roughly 18-year period, gross job gains per quarter averaged a little less than 2.8 million, or about 929,000 per month. Since the 2007-2009 recession was extremely severe, the table includes a separate column that excludes the data from that period.
/*snip*/...businesses with fewer than 20 employees provided the largest percentage of gross job gains (about 30 percent). Businesses with between 20 and 99 employees accounted for the next largest share (about 27 percent), with the largest firms (500 or more) accounting for a somewhat smaller percentage (about 26 percent). The remaining categorybusinesses with between 100 and 499 employeesaccounted for a smaller percentage of gross job gains. All of these percentages are little-changed if we exclude the recession period.
The analysis in the table seems consistent with the conventional wisdom that small businesses are the largest source of job creation in the economy. However, as suggested by previous studies, the conclusion tends to change when the focus switches to net job creation.
/*snip*/Finally, and perhaps most importantly, the BED data show that since 1992, net job creation tended to be largest among the largest firms: These firms accounted for about 38 percent of the total. The smallest firms showed the smallest percentage of net jobs created. This result does not change if the past recession is excluded from the sample.
In short, small businesses showed higher rates of gross job creation, but they also exhibited high rates of job destruction. Looked at from this standpoint, net job creation matters most. END OF ARTICLE QUOTATION
It all depends on how you want to interpret the data; and, of course, there is always the confusion of business size, especially when considering franchises. I think the real importance of small business is that it can be a vehicle for wealth creation (or destruction) and thereby has served as the incubator for America's upper middle class...therefore despised by the Regime.
Then by his calculations your backbone isn’t really your backbone, since it accounts for a relatively small portion of your body.
Thanks, I’ll study it more in detail later.
Data extracted on: July 20, 2012 (10:33:39 AM)
|P : preliminary|
Small = <$50mm revenues
Medium = $50-100mm
Large = >$100mm
This article is bs.