Small Business Bust

Back in the summer of 2009, Nathan Lane and I wrote a CEPR report (pdf) documenting something that is surprising to many Americans. The United States has just about the smallest small-business sector in the world’s rich economies.

Our report used OECD data to look at the share of workers in small businesses in each of a variety of industries (manufacturing, computer-related services, research and development, “restaurants, bars, and canteens”, real-estate activities, “renting of machinery and equipment”). These were all of the industry categories for which the OECD had produced comparable data on the employment share by enterprise size. Unfortunately, at that time, the OECD had no numbers for the distribution of employment by enterprise size for the economy as a whole.

But, the OECD’s Entrepreneurship at a Glance 2011 now reports internationally comparable data on total small-business employment for a collection of rich and selected middle-income countries. The first figure below shows the share of total national employment in each country in enterprises with one to nine employees. The United States is dead last, with about 11 percent. Germany is at 19 percent; France and Sweden, both 24 percent; Italy, 47 percent. (All three figures here exclude OECD data for Brazil, Ireland, Israel, Japan, Korea, Luxembourg, and the Slovak Republic, where the OECD data cover only those countries’ manufacturing sector.)

Employment in enterprises 1 to 9 employees

Source: OECD.

Using a cutoff of 50 employees for small businesses doesn’t change the picture in any meaningful way.

Employment in enterprises with 1 to 50 employees

Source: OECD.

And, not surprisingly, given the results so far, the United States has the highest share of national employment in large enterprises (those with 250 employees or more).

Employment in enterprises with 250 or more employees

Source: OECD.

3 Comments

  1. PeonInChief says:

    All you need to do is look at the cost of health insurance for small businesses to see why it’s very hard for small business to compete. (I worked for a small non-profit, and wept every month when I received our health insurance bill.) This means that small business has to pay outrageous sums for health insurance, so much so that it really can drive a business to bankruptcy. Or the small business can decide that it just can’t afford health insurance, and force employees who need insurance to jump ship for larger businesses or government.

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