Small businesses gain ground; employ over 50% of private-sector workers

Reversing a long-term trend, small businesses are taking a growing share of U.S. employment. Small firms employed 50.9% of private-sector workers in 2004, up from 50.7% in 2003, according to the latest government data. It was the third-consecutive year of small firms gaining, and followed nearly uninterrupted annual increases by big employers since 1988, according to the Small Business Administration data. (via USA Today

As more Americans work for small firms, however, they are less likely to get medical coverage and other benefits such as retirement plans, because small firms are less likely to offer those benefits. For example, 60% of companies with three to 199 workers offered health benefits this year vs. 98% of those with 200 or more workers, says the Kaiser Family Foundation.

Driving the employment trend:

  • Big companies — defined by the SBA as those with 500 or more employees — are more likely than small businesses to shed workers during recessions and slow-growth economies.
  • Big corporations are more likely to be in manufacturing, a sector ripe for replacing workers with automation through investments in technology.
  • Small companies are often in service industries such as consulting and health care, fields that require workers rather than machinery
  • Planned job cuts, especially in the automotive industry, soared 54%, to 100,315, last month from August, according to outplacement firm Challenger Gray & Christmas.

CEOs of Fortune 500 companies have grown more pessimistic about hiring, according to the Business Roundtable's most recent quarterly survey. 32% of CEOs said they expected U.S. employment would be higher in the next six months, down from 41% in the previous survey.

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