Small businesses are not our economic backbone

Salon ^ | 7-19-2012 | Jared Berstein

[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 aren’t small firms the job creators? As I’ve 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 don’t change much: 29% of jobs are at small firms, 27% at medium, and 45% at large. There’s 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 you’re used to hearing the opposite, which you hear a lot. There’s a reason for the different findings: establishments versus firms.

...

[Sir Napsalot]

charts are not included here.

The full article is on Jared Berstein's blog On The Economy (2nd article as of today)

[ibytoohi]

Er, and how did they get to be 500+ employee companies?

[WashingtonSource]

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.

[Steely Tom]

Jared Berstein is not someone I’ve ever heard of.

[Izzy Dunne]

There's a valid point here; it's all in how you look at the numbers.

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.

[Raycpa]

How many of those 500+ firms were once 1 man, 10 man, 50 man firms?

[Raycpa]

Apple computer
Microsfoft
Facebook

[mountainlion]

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

[csmusaret]

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.

[ScottinVA]

Whether in business-cycle expansions or the full run of these data, large firms — 500+ employees — contribute disproportionately to job growth.

If that's true, then that shoots down the leftards' argument about why high-earners' taxes should be hiked.

[TruthShallSetYouFree]

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

Yeah, like Solyndra. :)

[Raycpa]

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.

[boomop1]

He is a small busness, a whore for Obozo.

[jurroppi1]

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.

[Bigh4u2]

Really?

Take away all those ‘small’ businesses and see how fast the economy collapses..

What a putz..

[Sir Napsalot]

Riiiiight.

The numbers and ‘definition’ games Berstein played, he can make any claim he wants.

[Tallguy]

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.

[Common Sense 101]

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?

[Gene Eric]

>> 1-49, 50-499 and 500+: so small, medium and large

Go pound sand, jackass. 1-100 is small business.

[ican'tbelieveit]

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.