Small & Large Business Employment

CoRev brought up the claim that small firms account for 70% of job creation in the US economy.

Several years ago the Small Business Administration and Census began an annual survey of employment by firm size.

You can find the data here:

Here is a table of what the joint survey of employment by firm size found. From 1988 to 2006 — the most recent year published — small firms (under 500 employees) share of total employment fell from 54.5% to 50.2% of private employment. Over the entire period employment by small firms grew 13.3% while large firms employment grew 21.8%.

That sure does not look like small firms account for 70% of employment growth.

Care to show us the data supporting the claim that small firms account for 70% of job growth.

The other interesting results of the survey was that payroll per employee in large firms averages 125% of that in small firms. The Small Business Administration published a study that claimed small business account for over 50% of business real GDP. They based this result on the claim that productivity was much larger in small firms. But if small firms salaries are so much smaller than large firms salaries I find it hard to accept that their productivity is higher.

In the comments I was sent to the BLS to look at the business Dynamics data. I confess I was familiar with the data, but had never looked at it in terms of firm size. Yes, in a summary statement the BLS says that small firms account for some two-thirds of job growth over the period 1993-2009 that would seem to support the claim that most jobs are created by small firms. But within the BLS business dynamics database they also publish data on the level of employment by firm size. This data agrees roughly with the SBA-Census data that most employment growth was in larger firms. Obviously this is inconsistent with the same source — BLS Business Dynamics — stating that most jobs were created by small firms.

To be honest, I am confused. Can anyone explain this?

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