According to a new study, that is par for the course with small businesses.
On the eve of National Small Business Week, a new Connecticut Department of Labor study suggests small businesses are not the engines of job creation politicians are fond of hyping.
The Small Business Administration estimates that small businesses are responsible for 65 percent of the new jobs created on a net basis, when factoring in the impact of jobs that are eliminated in addition to new ones.
In the May edition of the Connecticut Economic Digest, however, Labor Department researcher Manisha Srivastava said it is not important to understand only where job counts are up on a net basis, but rather where they are actually being created, irrespective of the net impact of job destruction.
On that basis, Srivastava said, established companies have a far better record and represent a better place for job seekers to mine new positions.
“The majority of job creation occurs in mature firms that are 11 years or older,” Srivastava said. “Even though a greater number of jobs are also destroyed by mature firms, the number of opportunities available from mature firms outweighs availability of jobs from firms of all other categories, including small businesses.”
In his initial economic development move last year, Gov. Dannel P. Malloy seemed to implicitly recognize that fact by focusing his First Five economic development incentive program on companies adding at least 200 jobs in Connecticut.
After simultaneously increasing taxes on individuals and big businesses alike, with small business owners saying the increases hit them particularly hard, Malloy quickly followed up First Five with last fall”™s Small Business Express program. Small Business Express has drawn more than 325 applicants, with Stamford Insurance Group and Westport-based Catherine Cleare Interiors L.L.C. among the most recent companies to receive support under the program, agreeing to add an employee.
Nobody is shrugging off the contributions of small business ”“ in addition to Small Business Express for businesses of all kinds, Malloy has devoted ample resources to businesses in technology and other emerging markets that represent significant growth potential, and the Stamford Innovation Center is giving entrepreneurs a focal point to grow their companies locally.
Through the first three months of 2012, new business starts were up 8 percent from a year earlier, according to the Connecticut secretary of state”™s office, while business stops were down only slightly.
“The Small Business Express Program helps businesses who perform valuable services in their local communities, as well as companies bringing new products to national and international markets,” Malloy said, in an early May announcement. “Both types of businesses are important to a growing and vibrant Connecticut economy. Whether it”™s mom and pop on Main Street or (a) small tech company with (a) big idea, small businesses will lead the way to our economic recovery.”
If fashionable to break out the pompons in support of mom and pops, perhaps too many are pillaring larger companies that routinely slough off jobs in the form of layoffs, but also quietly fill new positions ”“ sometimes with First Five-style fanfare, other times with little notice at all.
And in Connecticut in particular, Srivastava feels, that dynamic is particularly noteworthy.
“Even though there is great variability between states on job creation from small and large-size firms, Connecticut is very close to the national average,” Srivastava said. “However, Connecticut is about six percentage points above the national average for job creation coming from mature firms. It is interesting to note that high job-growth states like California, Texas and Florida are on the lower end of percent job creation coming from mature firms.
“If the desired metric is simply job creation, then mature firms create the most, followed by large firms on average, and then small businesses,” Srivastava said.
