Public Policy, Economics and Entrepreneurship: August 2007 Archives

See my commentary on Bush's plan to rescue the subprime mess at our new blog site, the LockeSmith Blog.

I am pleased to announce a new blog called the LockeSmith blog. It is a joint effort of three of us here at Belmont. There will be periodic posts by Prof. Nathan Griffith (Political Science), Prof. Mark Schenkel (Entrepreneurship), and me. Here is the mission of the blog:

The Lockesmith Blog hopes to play an important role in the growing resurgence of the scholarship of classical liberalism through the exploration of the principles of individualism, private property and the free market, the rule of law, and social toleration.

The blog carries on the work started by Dr. Larry Hall, former Dean of the College of Arts and Science here at Belmont University. Larry was Nathan's mentor while here at Belmont, so it is only appropriate that he make the inaugural post.

We hope you enjoy this new blog. I will still be doing most of my ranting and rambling here at the Entrepreneurial Mind, but will also do cross-posts at the LockeSmith site. Please add the LockeSmith blog to your favorites and sign up for a regular feed so you don't miss a post.

The SBA has released their updated small business statistics. Here are a few of the highlights:

- Represent 99.7 percent of all employer firms.

- Employ about half of all private sector employees.

- Pay more than 45 percent of total U.S. private payroll.

- Have generated 60 to 80 percent of net new jobs annually over the last decade.

- Create more than half of nonfarm private gross domestic product (GDP).

- Hire 40 percent of high tech workers (such as scientists, engineers, and computer workers).

- Are 52 percent home-based and 2 percent franchises.

- Made up 97 percent of all identified exporters and produced 28.6 percent of the known export value in FY 2004.

- Small innovative firms produce 13 times more patents per employee than large patenting firms, and their patents
are twice as likely as large firm patents to be among the one percent most cited.

The number of new small businesses has grown steadily over the past few years. In 2002 there were about 570,000 new small firms. That number grew to almost 650,000 new businesses in 2006.

The new stricter bankruptcy laws have clearly had an impact. Bankruptcies in small businesses had been 34,000 - 39,000 per year for several years, but dropped to 19,000 in 2006.

Even with our growing dependence on small business in the US economy, the regulatory costs for small businesses continues to grow. The average employer with 20 employees pays about $7, 647 per employee in regulatory costs ($1,304 of this is tax compliance). The average cost per employee for large firms is about $5,282.

The NFIB's Chief Economist William Dunkelberg released this statement on small business job growth:

"Small-business owners managed to do some solid, but not spectacular, hiring in July. Sixteen percent reported increasing employment an average of 4 workers per firm, compared to 11 percent who reported workforce reductions averaging 2.4 workers. For all firms, this was an average increase of 0.4 employees per firm. Seasonally adjusted, the numbers are less impressive, with 14 percent increasing employment by 3.7 employees per firm, 13 percent reducing employment by 2.6 workers and, including all firms, a gain of 0.1 employees per firm. In construction, 20 percent increased the size of their workforce an average of 4.2 workers, and 12 percent cut employment by an average of 3.3 workers, producing an increase for all construction firms of 0.4 workers per firm (not seasonally adjusted).

"Twenty-three percent (seasonally adjusted) reported unfilled job openings, down three points from June. The decline in the percent of firms with unfilled openings anticipates an increase in the unemployment rate in the months to come. Thirteen percent of the owners reported that the availability of qualified labor was their top business problem, unchanged from June. Only taxes and the cost and availability of insurance received more votes for the number one business problem. No one likes high energy prices, but for service sector firms, this is not likely to be a top problem.

"Over the next three months, 17 percent plan to create new jobs (down three points), and 10 percent plan workforce reductions (up three points), yielding a seasonally adjusted net 13 percent of owners planning to create new jobs -- up a point from June. Fifty-four percent reported hiring or trying to hire new workers, 80 percent reported 'few or no qualified applicants' for their positions.

"That's a tight labor market," Dunkelberg concluded.

Since small business employs about 50% of all American workers, we need to keep our eyes on these trends.