In the political debates we continue to hear small business
praised as the real job creator—as
shown in last night’s encounter. The problem here is how to define “small
business.” I will propose a three-fold division—which can then be further
collapsed. Small business then means those employing 1 to 99 people, mid-size
business as those employing 100 to 999, and big business as employing 1,000
people or more. If we then say that “mid-sized isn’t small, and neither is big
business,” then we can derive small and big, big being a combination of
mid-sized and the bigger.
I will show here a variant of a graphic I published on LaMarotte back in September of 2010. It
shows job creation data for the period 1992 through 2005 from the Bureau of
Labor Statistics (link). The series I used has not been updated in the
same way since. The graphic here shows net
quarterly gains for the period 3Q 1992 through 1Q 2005:
Note here that these are net
gains, thus gains when job losses have been reflected. Note also that the two
lightly colored bars, for the mid-sized and the big business category, together
form the second bar.
In this expansionary period, bigger businesses created more jobs than small business. The
following tabulation brings the relevant details:
Average Quarterly Change in Jobs, 3Q 1992 to 1Q 2005
|
||||
Firms by
Employment Size
|
||||
1
to 99
|
100
or more
|
100
to 999
|
1,000
plus
|
|
Percent of Total Firms
|
97.6
|
2.4
|
2.2
|
0.2
|
Gains (in 000)
|
4,067
|
2,599
|
1,374
|
1,225
|
Percent of gains
|
61.0
|
39.0
|
20.6
|
18.4
|
Losses (in 000)
|
3,879
|
2,381
|
1,273
|
1,108
|
Percent of losses
|
62.0
|
38.0
|
20.3
|
17.7
|
Net
gains (in 000)
|
188
|
218
|
101
|
117
|
Percent of net
|
46.3
|
53.7
|
24.9
|
28.8
|
Worth noting here is that small business did create more jobs than the larger
categories—but the category also lost
more jobs than the others. The large losses wiped out 95 percent of the small
business gains—and this was a period of growth. The vast majority of firms is small, to be sure, not quite 99
percent, but close; 2.4 percent of firms produced more jobs than the 97.6
percent. But when it comes to trying to influence the masses, the politicians
know whom to praise.
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