In testimony before Congress’s Joint Economic Committee today, Treasury Assistant Secretary Alan Krueger provides further evidence that small employers have been particularly hard hit by the financial crisis and economic downturn.
Using research data from the Bureau of Labor Statistics Job Openings and Labor Turnover Survey data (known as the JOLTS data), Alan found that the pace of job openings has been rebounding at large employers (in green), but remains low at smaller employers (red and blue):
He also found important differences in the way that large and small employers reacted to the worsening of the financial crisis in September 2008:
[S]mall establishments responded by quickly laying off a large number of workers. Mid-size establishments … and large establishments … responded by sharply cutting back on hiring in the months immediately after the crisis, and while they also increased layoffs, the increase was not as large as that seen by the small establishments. [See his testimony for the corresponding charts.]
His bottom line:
[T]he improvement in the labor market seen to date has been unevenly distributed across establishments of different sizes. On the positive side, labor demand has generally trended up at large private sector establishments since reaching a trough in February 2008. Moreover, large establishments have apparently increased employment in five of the six months since September 2009–a possible early sign of durable job growth. At the lower end of the size distribution, however, labor demand by small establishments has continued to be weak, with notably low rates of new hires.
P.S. For an earlier discussion of the JOLTS data, see this post.
I wonder if any of the issues small businesses are facing have to do with tremendous corporate influence on Washington policy. I’m growing very concerned about the marriage of corporation and state we’re seeing in our country – it seems that due to the lobbying resources enjoyed by many large corporations, regulatory barriers to productivity might be more detrimental for small versus large companies.
Plus, even if the regulations and subsidies were equitably distributed, it would seem that a larger company, who has the benefit of economies of scale, is much more resilient when it comes to regulatory compliance costs.
Perhaps we’re strangling our small businesses with regulatory, subsidy, and tax policy?
Any opinions on this?
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I don’t know what research says about recessions in general, but I would expect that small employers are generally “more elastic”: faster to hire and fire in response to recessions. Makes me wonder about what the appropriate trade-off for the economy is between flexibility (reallocating jobs quickly in response to needs) and stability (dampening the economic cycle by stabilizing employment levels instead of booming booms and busting busts).
DSM