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U.S. Businesses Start and Stay Smaller

Categories: Manufacturing, Service Sector, Small Business, Wholesale and Retail Trade

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/

Public Comments

Comments listed below are posted by individuals not associated with CDC, unless otherwise stated. These comments do not represent the official views of CDC, and CDC does not guarantee that any information posted by individuals on this site is correct, and disclaims any liability for any loss or damage resulting from reliance on any such information. Read more about our comment policy ».

  1. May 19, 2012 at 3:16 am ET  -   Sachin Sethi

    Very interesting article as generating profit by starting new business is as important as taking care of the healthy and safety in a small business.  

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  2. May 22, 2012 at 11:35 am ET  -   Dion Michel

    I believe that nowadays more and more business goes online, I’ve personally launched a website and agree that society should understand the difficulties conneted with small business launching.

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  3. May 24, 2012 at 5:20 pm ET  -   Jordyn

    “Are new establishments with fewer employees likely to experience higher levels of occupational stress than those with more employees?”

    I would say the answer to this is likely no. It seems highly likely that small businesses are hiring less people due to the way technology has greatly streamlined so many arduous tasks. If this is the case, there are less tasks to do, so the few employees wouldn’t experience any additional stress.

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  4. August 7, 2012 at 10:59 am ET  -   Pat McConaha

    This only makes sense that in a prolonged recession that businesses would start out smaller and stay smaller. Not as many resources to draw from. Also, as more and more business look to the internet there will be a great shift to the online business. We recently moved from a brick and mortar business to a 100% online business. We had to downsize from 5 employees to 2. It’s a tough thing, but it is starting to show benefits.

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  5. October 5, 2012 at 9:20 am ET  -   Jerry

    Recession has slower down the pace for buying a business in Ireland and in US and rest of the world. But now the countries are recovering from the loss and are trying to make the business better and their economy better.

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  6. January 23, 2014 at 4:28 pm ET  -   mark

    i dont know what is like in US but almost all small businesses have gone now, just supermarkets and internet sites seem to be really growing

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