Small Business, Big Truth

by Giovanni Coratolo

Every so often there is someone who likes to try and poke holes in the small business job creation statistics that form the foundation for public policy.  Today it was Steven Pearlstein’s turn in his article "Small Business, Big Fable."  Pearlstein's "sound economic logic" goes like this: 

• It’s not all of small business that create net new jobs, just a few fast growing businesses most of which shouldn’t even be called small. 
• Many of the jobs that are being created are not being created at all, just shifted from big businesses to small businesses through outsourcing.
• The reason that big businesses employ a job shifting strategy to small businesses is to gain a competitive advantage since many small business owners don’t offer health care.
• These small firms are not competing with big companies, but with smaller ones with similar cost structures.
• Endorsing an employer mandate for health care, with no government help for small business, would not hurt small business since this would create a level playing field in which they would all have to raise prices a few percent to cover the cost.  

Let's just dismiss out of hand his claim that "one reason small businesses 'created' all those jobs in the first place is that they enabled big companies with generous health plans to outsource work to small companies that had lower cost structures because they offered no insurance at all" as the standard chimerical big business bashing that it is. Then let's get to the facts that he chooses to ignore:

Fact - The U.S. Bureau of Labor Statistics (BLS), taking into account the quarterly changes in job creation from all firms over a 12 year period, indicate that 60 to 80 percent of net new jobs come from small business. 

Fact - During periods of recession and recovery, BLS data indicates that small business job growth actually comes from smaller firms, not larger small businesses or large business as Pearlstein would have us believe.  

Fact - We live in a global society in which many of the competitors of small and large businesses are abroad.  Just indicating that small businesses could increase costs and remain competitive is a fallacy.

Fact – Small businesses do compete with big businesses for business in this country.  They also compete for talented employees. 

Fact – Our health care system is one of the most expensive of any of the industrialized countries costing us 16% of GDP and growing.

Fact – Small businesses, when offering health care, on average pay considerably more per person than larger businesses.

The U.S. Chamber is for sensible health care reform that will provide access to affordable flexible plans for the uninsured, control the sky rocking costs, and provide incentives for everyone to participate in the system.  We will not advocate doing it on the backs of our small business community who, yes, account for 60-80 percent of all net job creation and is especially important if we are to have an economic recovery.  Making businesses pay for the inefficiencies of a system that is out-of-control through an employer mandate in order to expand coverage is not the right approach.

Comments

[jonathan]

The big truth truth is that they are so strong in every economy condition. Small business growth should be supported by government. Thank you.

[ultrayellowpages]

Making businesses pay for the inefficiencies of a system that is out-of-control through an employer mandate in order to expand coverage is not the right approach.

Saratoga springs

[ChamberPost]

Yes readers please remember - Pearlstein doesn't give a rat's tookus about small business - we do.

[The Old Man]

Readers must remember - Pearlstein has no vested agenda - the Chamber does.

[Ed]

The biggest advantage to universal coverage is that more people will be able to work for small businesses. Too many people cannot work for small business b/c they need a job that provides coverage.

Universal coverage will also allow people to move more easily for the same reason.

Furthermore, it's not just employees that are lacking coverage - the business owners themselves are unable to get coverage.

C'mon Chamber, you can do better than this.