Jackson County Employment by Firm Size and AgeFebruary 9, 2017
Have you ever heard statements such as “small businesses create the most jobs”? You might agree, but how would you know if this is a fact? One source for this information comes from the Census Bureau’s Local Employment Dynamics program. Data from the Local Employment Dynamics program is very detailed, as it is administrative data, rather than survey-based information. Data by specific industry as well as other criteria such as employment by race and ethnicity are also available.
Information regarding firm size and age is a fairly new addition to this warehouse of job data. This allows questions such as pay difference among different age and size firms to be answered, along with employment change and growth rates among firms with those different attributes.
Part of the challenge in affirming or refuting claims such as small businesses create the most jobs is the definition used in describing what a “small” business is. Even within the U.S. Small Business Administration, the definition of a small business varies widely depending on the industry the business is in.
Payroll processing firm ADP defines a small business as one with fewer than 50 employees, medium-sized businesses 50 to 499 employees, and large businesses 500 or more workers. The Census Bureau publishes five business size categories. In Jackson County in 2015, there were about 27,500 private-sector jobs in the largest size category (500+), which represented 39 percent of payroll employment. The next category, 250 to 499 employees, had just less than 4,000 workers. The other “medium-sized” category, using the ADP definition, were firms with 50 to 249 employees. This category comprised about 16 percent of total private employment. The ADP-defined small business category includes firms with fewer than 50 employees. Firms with zero to 19 employees had 19,076 workers and represented 27 percent of total private employment in Jackson County. The next larger “small business” category was firms that have between 20 and 49 workers. Those firms had 9,644 workers or 13 percent of the total in 2015. Businesses with fewer than 50 employees had about 40 percent of all private jobs.
Now let’s look at job change from the bottom of the employment recession in 2011 through 2015 to contrast net job change in the ADP-defined categories of small, medium, and large firms in Jackson County. Over that time, small businesses added the most jobs, up by 2,925, and had the fastest growth rate with an 11.5 percent increase. Large firms added significant employment as well, up by 2,525 – a gain of 10 percent. Medium-sized firms added the fewest jobs, up by 1,220 or a gain of 8.7 percent from 2011 to 2015.
Looking at the more detailed categories published by the U.S. Census Bureau sheds additional light on recent job growth by size of firm. Among medium-sized firms, those with 250 to 499 employees, had much faster growth than the 50 to 249 category. A similar disparity is seen in the small business categories. Those with 20 to 49 employees grew at almost five times the rate of firms in the zero to 19 category.
Wages by Size of Firm
Wages by size of firm are also published from the U.S. Census Bureau’s Local Employment Dynamics program. Data are available going back to about 1991, allowing a longer look at wage and employment trends.
From 2011 to 2015, average wages rose faster at firms with 500+ employees than other firm size categories. Wages rose about 15 percent for the largest firms compared with between 9.5 and 11.5 percent for the other firm size categories. In 2015, employees at the largest firms had average monthly earnings of $3,884. Those with 20 to 49 and 50 to 249 employees had the next highest average pay at $3,409 and $3,368, respectively.
Employment by Age of Firm in Jackson County
Despite the notoriety and excitement surrounding start-ups, new firms and innovative new industries and businesses, by far most private-sector employees (79%) in Jackson County work at firms 11 years old and older. Just less than 10 percent of all employees in the private sector work at firms between six and 10 years old. Less than 5 percent of all employees work at firms that are less than five years old. One trend that this recovery from the past recession is noted for is the low numbers of new businesses compared with other recoveries. We can see this trend locally by looking at total employees in the newest firms – those zero to one year old. These fledgling firms had about 2,600 workers in 2011. By 2015, employees at the youngest firms totaled about 2,100, a decline of almost 20 percent. On the other end of the firm-age spectrum, employment at firms age 11+ rose by about 6,800, a 13.7 percent rise. Employment at firms six to 10 years old also declined between 2011 and 2015, down by about 830. Firms between two and five years old added about 1,200 employees over that time.
Older firms tend to have higher wages. Some things get better with age, apparently including average monthly pay at older firms. The average monthly wage in firms 11 years old or older was $3,560 in 2015. Firms age six to 10 years had an average wage of $2,822.
Wages were slightly lower among firms that are less than five years old. Interestingly, wage growth was fastest in the youngest firms from 2011 to 2015, increasing 38 percent. Wages rose about 18 percent at firms ages two to three years, which had the fastest growth. Average monthly wages increased by 15.6 percent for the oldest firms. The slowest wage growth occurred at firms ages six to 10 years, which increased 2 percent from 2011 to 2015.
There are many more data sets available and now even easier to access using the “LED Explorer” application on the U.S. Census Bureau’s Local Employment Dynamics website (https://lehd.ces.census.gov.span).