Three quarters of businesses employ fewer than 10

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By Harold Morgan

We are a state of small businesses. Indeed, we are a nation of small businesses.
The state Department of Workforce Solutions has some new numbers for us. The insights, though not new, are worth remembering amidst the usual platitudes of our economic conversation and as the interim Jobs Council committee does its work. For example, 14 private sector establishments employed more than 1,000 people during the first quarter of 2012. Two are national laboratories — Los Alamos National Laboratory and Sandia National Laboratories. The six in health care and social assistance most probably are hospitals.
The department’s publication is the quarterly Regional Review of labor market information. Find it at dws.state.nm.us/Portals/0/DM/LMI/Regional_Review_Fall_2013.pdf.
As noted above, the numbers are for private sector “establishments,” that is, specific locations, and not for “firms.” The distinction is that a firm, say a restaurant chain, can have multiple establishments. Further, a firm, again a restaurant chain, with multiple establishments can operate under the brand umbrella of a national firm while, if a franchise, remaining very much locally owned, a point lost by those with self-induced paranoia about “corporations.”
Those 14 biggest guys employed 45,850 people during our time period, the first quarter of 2012. That makes for 7.8 percent of the 591,082 jobs with an average of 3,270 per establishment. While the number of new locations of such size is tiny, the impact means the attention of economic developers is well worth it.
The smallest establishments, those with fewer than 10 employees, account for 77 percent of the establishments, but only 17.7 percent of employment. Taken together, establishments with fewer than ten workers employ more than 104,000 people. Establishments with fewer than five employees provide 8.1 percent of employment and are 60.3 percent of the establishment total. In general, earnings grow as firms get larger.
The impact of the very smallest is larger than the numbers admit. An establishment might have no employees while remaining entirely official. A one-person firm designating that person as an employee makes an expensive choice, something I learned the hard way when creating my consulting business. Paying unemployment compensation is just one of the “benefits” of employing oneself. Those left out, the department said, “include self-employed workers, most agricultural workers … most railroad employees” and others, including those in the military. Individuals consulting for research organizations probably reside in the left-out group.
This mass of individuals scurrying (or perhaps not exactly scurrying) to earn a living is tough to track because of the diffuse nature. They are economic grains of sand, scattered across the state. In many cases, but in an unknown number, they operate from home. In many other cases, but again an unknown number, these individuals are outside the system generating the numbers. They are our grey economy, working for cash. Yet, these are the ones that can grow the fastest.
Our lesson in the workings of tiny firms came during our remodel last year. The contractor had two or three employees plus himself. The electrician was two people, the plumber, one. The roofer and the stucco guy both brought a crew. It was a network of businesses. As a group, they provided the services that might come from a larger establishment but without the hassle and overhead of being bigger. Cell phones are crucial to the network.
While the 14 largest establishments pay more, an average of $19,885 per employee during the first quarter of 2012, tiny establishments can be vibrant. One is The Glenwood Gazette of Silver City, a 14-year-old sole proprietorship, which serves tiny and larger communities in four states and had a 36-page October issue with flood stories, 4-H and history.