Magazine

The Real Job Engines


It's true: Small businesses are the country's primary job engine.

Just how big a role small businesses play in generating new jobs has been a hotly debated topic. The main reason for the contention has been the lack of reliable data. But recent numbers from the Labor Dept. make it clear that small businesses created a greater share of total jobs than the largest companies in the past 13 years.

From the third quarter of 1992 to the second quarter of 2005, the payrolls of businesses with fewer than 100 employees accounted for 46.7% of new jobs created. In contrast, payrolls of companies with more than 1,000 workers accounted for only 28.2% of new jobs in those years.

Since the last recession in 2001, small businesses have not only hired more workers than their larger counterparts but also hired sooner after the slump. Small businesses began adding workers early in 2003. Payrolls stood 772,000 workers above their prerecession levels in mid-2005. Large companies have remained cautious, with total payrolls in mid-2005 more than a million workers below the level at the beginning of 2001.

"The new data should help economists and policymakers better understand the dynamic nature of the labor market," says Bureau of Labor Statistics economist David Talan. They also give small business advocates more credibility when lobbying Washington on matters such as regulations and taxes.

By James Mehring


The Good Business Issue
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