U.S. Businesses Start and Stay Smaller

U.S. businesses of the new millennium are starting smaller and staying smaller than in decades past. That’s the conclusion of a study reported in the March issue of Monthly Labor Review.

The study found that business size, as measured by number of employees, usually declines during economic recessions and increases during expansion years resulting in an overall upward trend. However, unlike previous decades, that trend did not persist during the 2000s when overall size declined slightly. That shift was mostly explained by a decrease in “birth size” of businesses. For example, between 2000 and 2007, the average size of establishments that were less than one year old declined from 7.3 to 5.3 employees while the size of establishments that were seven or more years old showed a much smaller decline from 22.8 to 22.2.

The authors of the study speculate that this smaller and persistent establishment birth size may be a sign “that new establishments are entering the economy with new modes of production that place a greater emphasis on technology and a lesser emphasis on labor.”¹

The study has implications for worker health and safety. Comparisons of hazards in new businesses by business size would help society understand the implications of the decline in size. For example, one Canadian study found that businesses that survived five or more years had injury rates that were less than half the rates of businesses that survived only two years or less.²

Other pertinent research questions include:

• Does a shift to more reliance on technology in new businesses represent added risks (even temporarily) to the workers around that technology, especially when there are fewer of them?
• Are new establishments with fewer employees likely to experience higher levels of occupational stress than those with more employees?
• As average new establishment size declines, do we need new, easy-to-understand and inexpensive ways to assure safe and healthful working conditions such as the Total Worker Health approach and hazard control banding?
• Could health and safety information and services be made more broadly available to new small businesses by business-to-business organizations outside the public health arena (e.g., chambers of commerce, small business development centers, workers’ compensation insurance companies, professional associations such as accountants, and local government operations such as public health departments)?

Next week, May 20-26, 2012, is National Small Business Week.³ As small businesses gather in Washington to celebrate their successes and discuss their challenges, it is an opportune time to think about how to protect their workers. If you have experience working with a new and small business on health and safety issues, we would welcome your perspective on important issues to consider as new businesses start and stay smaller.

For more information on safety and health in small businesses see the NIOSH Small Business Topic Page.

—Raymond Sinclair, Ph.D.

Dr. Sinclair is the Coordinator of the NIOSH Small Business Assistance and Outreach Program.

References

1. Choi EJ, Spletzer JR. The declining average size of establishments: evidence and explanations. Monthly Labor Review 2012:50-65.

2. Holizki T, Nelson L, McDonald R. Injury Rate as an Indicator of Business Success. Industrial Health 2006:166-168.

3. http://www.nationalsmallbusinessweek.com/