January 20, 1997

A PROFILE OF THE SMALL-BIZ WORKFORCE

Nearly three-fifths of the country's 99 million private-sector employees work at companies with fewer than 500 workers (the government's definition of a small business). Just who are these workers? And how do they differ from those led by their large-company counterparts?

That was the subject of a study released Jan. 28 by the Small Business Administration. Based on Census and Bureau of Labor Statistics data, the report found that small companies are more likely to hire workers at society's margins -- those who had not graduated from high school, for instance, as well as those younger than 25 or older than 65. Small businesses are also more dependent on part-time employees. Companies of under 10 workers were nearly twice as likely to employ part-timers as are companies with more than 1,000 employees.

"Large businesses take the cream," says Brian Headd, the SBA economist who conducted the study. "And it's tougher for small companies to attract employees because they offer fewer benefits. Reducing barriers for offering them would seem the right way to go."

Indeed, the SBA's study is not beyond politics. It urges lawmakers to include small businesses when developing new welfare-to-work programs. And, echoing a constant plea of small-business advocates, it recommends reducing the obstacles for providing pension and health-care plans. While the study does note that the percentage of small companies offering pensions actually jumped from 30.4% to 34.4% from 1992 to 1996, that number is still far below the 66.5% of large companies with retirement plans. Forty-seven percent of small companies offered health coverage, compared to 68% for large ones.

The report also revealed some surprising statistics on race. In particular, it found that as companies got bigger, they were more likely to employ blacks. But Hispanics were most likely to find jobs at smaller companies. The workforce at very small outfits (10 employees or less) was 13.2% Hispanic, as compared to 8.6% for companies of 1,000 employees or more.

Other findings: Women are hired at roughly the same rate at both large and small companies, but they make up fewer of the self-employed (37% in all); Of self-employed, only 11% make more than $50,000. Altogether, small businesses account for 99.7% of the country's total 5.4 million employers.

By Dennis Berman in New York