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Jan 07

Why small business jobs are overrated

Posted by Stephen Taub in workforceworkerssmall businesssmall and medium-sized businessjobsjob securityCashCareers/Management

Stephen Taub

Here we go again.

The disappointing number of jobs created in December has renewed calls for incentives to boost hiring by small companies. After all, goes the conventional wisdom, most new jobs are created by the puniest companies in our country, the backbone of the US economy.

While it may be true that small, growing companies are a large source of new jobs, these jobs are also way over-rated and extremely unstable.

They usually pay less than comparable jobs at larger companies. They are also likely to offer fewer benefits than larger companies, such as health care and amount of vacation time, and they are typically quicker than their bigger brethren to cut benefits like health insurance during tough times.

Oh, and their failure rate is greater, so employees are usually less secure and less confident to make long-term financial commitments, knowing their jobs could easily be gone tomorrow.

You don't believe me? Well, then let's look at a 2009 survey of 510 decision-makers at US small businesses, released by Aflac and conducted by Accelerant Research.

The study found that companies that experienced a decline in revenue over the previous year were particularly pressured to reduce insurance costs, cut back on employee benefits and slash employee wages. In fact, 69 percent of companies with reduced revenues were finding it more challenging to offer strong benefits packages, compared with companies whose revenues stayed the same (56 percent).

Nearly half of decision-makers (43 percent) said they were more likely to cut back on employee benefits, with 65 percent admitting they were more aggressively looking for ways to reduce insurance costs.

The survey showed little difference in levels of concern based on the number of employees and company revenues. Among the few differences: Seventy-one percent of small businesses with staffs of 50 to 99 employees reported that they were more aggressively looking for ways to reduce insurance costs, while that number fell to 56 percent for companies with 10 or fewer employees. But, that probably meant that the owner did not want to cut his own family's health insurance, so he kept it for the few non-family members as well.

Now, I realize this survey was conducted at the depth of a horrific recession. And large companies also cut back benefits, instituted salary freezes, required employees to take a number of days off without pay, and instituted massive layoffs.

Small companies, however, do not have as much wiggle room to withstand a downturn and will do almost anything to try to survive. Keeping employees happy is not the number one priority in a crisis.

If you want to see job growth take off in this country, large companies, especially those that export, will need to lead the way.

Comments (1)Add Comment
Ron Watson
written by Ron Watson, January 07, 2011
Sorry i do not agree with this view point at all. You failed to consider that the responsibility and work performed at small companies is much more significant than a large company. A large company will not take the same risk on your skill set. Small companies will often also provide you options as part of the upside. If you really want to make a difference and have a chance at really contributing to something great.....small companies are where it happens. Statistically large companies are not the innovators my friend!

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