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Late Breaking News |
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| Date: July 13, 1998 3:01 pm Contact: Economic Policy Institute www.epinet.org Nan Gibson (202) 331-5546 Marcus Tonti (202) 331-5536 Brian Lustig (202) 331-5530 |
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Latest News Releases
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Small Businesses Offer Workers Lower wages, Inferior Benefits, Job Instability; Exemptions From Labor Or Environmental Standards For Small Firms Questioned | ||
| WASHINGTON - July 13 - Employees of small firms receive lower wages,
fewer benefits, and less job security than their counterparts at large companies,
according to a report released today by the Economic Policy Institute (EPI). The report finds that, despite the commonly held view that small business is an engine of economic growth in the U.S., small firms (less than 50 employees) do not generate more jobs on net than large firms and the quality of the jobs they create is inferior to large businesses. In the new volume Small Consolation: The Dubious Benefits of Small Business for Job Growth and Wages, authors Dale Belman and Erica L. Groshen examine the quality of jobs created by small firms, and Julia Lane and David W. Stevens examine the contribution of the small business sector to overall job creation in the economy. The study also finds that: Employees of large firms (1,000 or more employees) are better compensated than small business employees. Large firm employees earn on average 39% more than employees at small firms. Workers at large firms receive better benefits than their counterparts at small firms: 68.7% of employees at large firms are covered by pension plans, compared to only 13.2% of employees at small firms. Also, 78.4% of large firm employees have health insurance, while only 30% of those employed at small firms receive health insurance. Large firms provide better job security. Job tenure averages 8.5 years at large firms, nearly double the 4.4 years that workers at firms with less than 25 employees enjoy. While new and expanding small business create new jobs at a higher rate than their larger counterparts, they also eliminate jobs at a higher rate. According to the authors, the advantage large firms have enjoyed in offering better compensation and benefits has persisted for over a century and exists across all types of workers, industries, and countries. The study also shows that the gap between large- and small-firm compensation has been widening, not declining, over the last two decades. The study points out that small business has long been lauded as a source of economic virtues such as job growth, entrepreneurship, innovation, cost reduction and flexibility. As a result, small firms receive preferential treatment with respect to public policy and laws, often remaining exempt from the labor and environmental oversight and regulation that large firms must abide by. For example, firms with under $500,000 in revenue are not covered by minimum wage laws and companies with under 50 employees are not subject to the Family and Medical Leave Act nor are they required to file affirmative action plans. "Public policy, rather than favoring small business by exempting it from many forms of regulation, should strive to be size neutral," the study concludes. Dale Belman is an associate professor of economics at the University of Wisconsin-Milwaukee. Erica L. Groshen is assistant vice president, Federal Reserve Bank of New York. At the time this study was written, she was an assistant professor of economics at Barnard College, Columbia University, New York. Julia Lane is an associate professor in the Department of Economics, The American University, Washington, D.C. David W. Stevens is executive director of the Jacob France Center, University of Baltimore. The Economic Policy Institute is a nonprofit, non-partisan economic think tank based in Washington, D.C. Founded in 1986, EPI seeks to widen the debate about policies to achieve healthy economic growth, prosperity and opportunity in the United States. Founding scholars of the Institute include Lester Thurow, Robert Reich, Ray Marshall, and Jeff Faux. To order copies of Small Consolation, contact EPI at 1-800-EPI-4844. ### |
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