TIMOTHY NOAH SEPTEMBER 29, 2011
Charles Kenny, a fellow at the Center For Global Development and the New America Foundation, has a good piece in Business Week disputing the notion that small business is the key to economic recovery. Small businesses tend to remain small, so they don't provide many new job opportunities. Start-ups begin small, but one study of companies created between 2004 and 2008 found that only 3 percent added more than 10 employees. Among small companies in their second, third, fourth, and fifth years of business, more jobs are lost to bankruptcy than are added by new hiring. Around the world, "a society's wealth is inversely proportional to the number of people who earn their livings from small businesses.... [M]icroenterprises run by poor people in the developing world are usually the result of an absence of other opportunities rather than an abundance of entrepreneurial zeal."
As is often the case with such pieces, Kenny overstates his point somewhat. It remains true that most jobs, for good or ill, are created by small businesses for the simple reason that there are so damn many of them. And the health of the nation at the community level depends on flourishing small enterprises, as my late friend the journalist and community activist Jonathan Rowe would be quick to point out. (If you aren't familiar with his writings, you should be. Click here for an archive.) As someone who recently traded a job at a corporation (the Washington Post Co.) for a job at a small business (the New Republic) I certainly appreciate the advantages smallness can offer. But all other things being equal, you're usually better off working for a big company than working for a little one.