Tue Aug 4 05:34:40 2020
<9e126bf3> this is the shit I always talk about. Socialists HATE small businesses more than big biz fascist corporatism. Actually, the only thing they hate about corporatism is when it isn’t nationalized. When it is, they love the shit out of it. It’s because of how they fetishize the de-atomization of the economy as the primary mechanism to grow working class power <https://twitter.com/jacobinmag/status/1290074904038191105?s=20>
<9e126bf3> <https://jacobinmag.com/2018/01/small-businesses-workers-wages>
— Small Businesses Are Overrated
— We shouldn’t fetishize mom and pops. They offer lower wages, skimpier benefits, and inferior labor protections.
<9e126bf3> > In <https://lbo-news.com/2011/11/26/from-the-archives-the-small-business-myth/|reality>, small business promotion is mostly a bad idea. Small businesses pay lower wages, provide worse benefits, are often exempt from important worker protections, and are incompatible with the way unionization works in the US.
— From the archives: the small business myth
— This is a piece I wrote years ago for the mostly right-wing Canadian paper The National Post. Though more than a decade old, it’s still mostly true and relevant. Sorry—no links to sources and such.
National Post (Canada)—September 23, 2000
SMALL IS NOT BEAUTIFUL Forget the romantic view of small business: for employees, big firms are less nasty places to work Doug Henwood
Everybody loves small business. Well, maybe Fortune 500 CEOs and the investment bankers who serve them don’t, but practically everyone else does. Across the political spectrum, it’s celebrated for its authenticity, pluck, and copious powers of job creation. On the right, the needs of small business are used to counter proposed regulations or minimum wage increases, as if the virtues of small business were self-evident. On parts of the left, small business is positioned as local and human-scaled, in contrast with globe-striding behemoths.
This is a mass infatuation badly in need of some fact-checking.
Small business creates jobs, yes, but it also destroys them in large numbers, since small firms go under so frequently.
Small business pays less, innovates less, and does more physical damage to nature and workers than the big guys.
You often hear it said that small business creates most new jobs. That’s a half-truth. Most people work for firms employing under 500 workers, the semi-official definition of a small business, so it’s not surprising that such firms should be responsible for the bulk of job growth. The real question is whether small business creates more than its share of new jobs. And there the answer is no.
Firms employing fewer than 500 people accounted for 78% of U.S. workers in 1980, 80% in 1990 and 80% in 1996 — in other words, the share was essentially unchanged over nearly two decades.
Some people might think that businesses with hundreds of employees aren’t so small, but the numbers for really small operations are quite underwhelming: firms employing fewer than 20 people accounted for 26% of workers in 1980, 26% in 1990 and 26% in 1996 (that repetition is no typo). If small firms, no matter how defined, were really the prodigious job machines they’re supposed to be (and if big firms were as relentlessly downsizing as the headlines would lead you to believe), then their share of total employment should have increased dramatically over the course of 16 years.
That underwhelming performance of really small business is worth a bit more attention because, despite these numbers, it’s still often claimed that that’s where all the real job action is. The claim is ultimately traceable to 1980s work by the consultant David Birch, who once famously said that 88% of the new U.S. jobs created in the first half of the 1980s were in firms employing fewer than 20 workers. That factoid was repeated by pundits and politicians, and has since made its way around the world. But it’s not true.
Mr. Birch came up with this nugget by playing with some computer tapes from the credit rating and business information firm Dun & Bradstreet. But a closer examination conducted some years later showed the D&B tapes to be full of errors, at odds not only with official unemployment insurance registration info, but even with the phone book. Firms were classed as being born and dying when they merely changed hands. And Mr. Birch’s methodology was pretty idiosyncratic, to put it kindly.
For example, firms that started in the very small category — fewer than 20 workers — were categorized for all time as staying there, even if they’d grown beyond the small category. Or, more wackily, if a firm with 600 employees had a bad year and canned 200 of them, this would show up as a gain of 400 jobs for the small business sector. Not that Mr. Birch ever fully disclosed his techniques, like most serious researchers would; he did, however, tell the Wall Street Journal in 1988 that his figures were “silly,” and that “I can change that number at will by changing the starting point or the interval. Anybody can make it come out any way they want.” Despite that confession, Mr. Birch is still taken seriously by the U.S. press.
More rigorous work than Mr. Birch’s shows that the job creation story is far from simple. For example, a detailed study of 40,000 U.S. manufacturing firms between 1972 and 1988 by Steven Davis, John Haltiwanger and Scott Schuh found that “large, mature plants and firms account for most newly created (and newly destroyed) jobs.”
Smaller employers generated plenty of jobs, but they also destroyed them in great quantities; new jobs were more likely to persist at larger employers than smaller. They concluded that “in a nutshell, net job creation…exhibits no strong or simple relationship to employer size.”
What about job quality? Let’s start with pay. A study by the U.S. Bureau of Labor Statistics (BLS) for 1995 showed little variation in pay for professionals and managers by establishment size, with small operations (those with fewer than 500 workers) paying 1% below the national average, and larger ones (1,000 workers or more) paying 2 to 3% above average.
At finer levels of occupational classification, the differences were occasionally a bit wider, but not profoundly so. Differentials widen, though, as you move down the status hierarchy. Data entry clerks in small establishments earned 7% below the national average, while those in large firms earned 20% above. Gaps for janitors were wider, and those for labourers were wider still. (Though this is mainly a story about private business, similar patterns were visible among government workers; in small jurisdictions, workers in “protective services”—like cops and prison guards—earned 18% below the national average, while those in large ones pulled in 11% more. This sheds new light on the passion in the United States for small government.)
These are pretty broad-brush patterns, and there may be simple reasons why pay increases with employer size. Maybe big firms have “better” workers—more educated, more experienced—and are more likely to be unionized. But there is now a large literature in economics showing that worker “quality”—I keep putting these things in quotes because, while conventional economists use phrases like this, I find it offensive to talk about people as if they were consumer durables ranked in some kind of buyers’ guide—explains some of the pay differential, it hardly explains all. In a phrase, size matters, and quite a lot—and there’s good evidence that the advantage has been growing over time.
Though the relation was first noted as early as 1911, a classic modern study in the field is a 1989 paper in the Journal of Political Economy by Charles Brown and James Medoff. They crunch data from several different surveys, and all tell pretty much the same story: while bigger firms (and bigger plants or offices within firms) do have “better” workers, that accounts for roughly half their pay advantage. Larger outfits pay more for similar work done by similar workers than do smaller ones. Using standard statistical techniques, this fact of economic life persists regardless of occupation, industrial sector, education, experience, geographical location, union status. The disparities remain whether workers are paid an hourly rate, a piece rate or a salary. Workers who move from small employers to large and presumably carry with them the same set of skills they had on their old job, generally get a significant raise (roughly equivalent to going from a nonunion job to a union one)—and the reverse is true as well.
As with pay, so with benefits. As of the mid-1990s, just 62% of full-time workers in small independent establishments (what the U.S. BLS calls plants and offices…
