Economist: Small businesses are not job-growth engines

2 min read ·


Donkey and Elephant fighting (politics)Whoa. Jared Bernstein, the former top economic adviser to Vice President Joe Biden, just threw cold water on what many politicians want you to believe about small businesses.

They aren't the "engine of job growth," he said.

"In what may be the most misunderstood fact about the job market, although most companies are small — according to 2008 census data, 61 percent are small businesses with fewer than four workers — more than two-thirds of the American work force is employed by companies with more than 100 workers," he wrote yesterday in an op-ed for the New York Times.

Even with the federal government's definition of 500 employees as a "small business," you still get more than half of the workforce employed by large companies, he said.

The issue is incredibly timely, as nearly every politician running for office is touting the importance of small businesses and their impact on job creation.

While Bernstein doesn't advocate ignoring small businesses in policymaking, he does fault the industry's biggest lobbyist — the National Federation of Indepenent Businesses — for championing Republican policies that ignore the top problem with small businesses today — weak sales. Specifically, he criticized the NFIB for not being pragmatic and backing the jobs bill from the Obama administration.

I contacted the NFIB today, and the organization had this response to Bernstein's op-ed:

"Unfortunately, the jobs bill is just a nightmarish deja-vu of failed policies that do not address the fundamental problems facing small business today. Yes, weak sales are the most significant problem facing small businesses right now, but what our own members tell us every day is that they don't need a huge federal stimulus program to increase their revenue. Small-businesses owners are practical and they know we can't spend our way out of this recession and into job creation. What entrepreneurs need is for the government to get out of their way—and that is exactly what NFIB advocates. Only then can small firms grow and thrive, and create the jobs that Mr. Bernstein seems to think only come from Wall Street and the big guys. "

Read the original editorial, "Small Isn't Always Beautiful" and leave a comment here. How do you sort out this tiff?