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Main Street Wednesday – Small Business Job Creation Declines to 55%

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August 13, 2014

By Bob Coleman
Editor, Coleman Report

CRPMGraph081314I like small business professor Scott Shane’s work. It’s usually spot on and useful.

Today’s analysis of small business job creation is an excellent example.

While it is true small business creates more jobs every year than big business, the margin is shrinking. Topping 67% in the 80’s, the figure has shrunk to 55.5%

Writes Scott, “Economists are not sure why small businesses are accounting for a smaller fraction of job creation and private sector employment than they used to. Some analysts point to the effects of rising health care costs and regulation, which tend to hit smaller companies more heavily than big businesses. Others focus on changing industry composition, pointing out that the real estate and construction sectors, where small businesses are more prevalent, have shrunk dramatically over the past two decades.

“Still others concentrate their attention on the decline in bank lending to small companies, which historically have relied on bank credit as a source of capital. And some economists point out that the decline in small business’s share of job creation is really the result of increased job generation at big companies.

“Whatever the explanation, the facts remain: Small business’s shares of both job creation and employment have both been trending downward for the past two-and-a-half decades.”

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