Small Companies Are Still Afraid To Add Workers...Karen Pennar
Add another theory to the growing list explaining poor growth in payrolls: Small businesses, which fired up the great American job machine in the 1980s, have been far more timid in their hiring recently. So argues David H. Hale, economist at Kemper Financial Services Inc.
From 1979 to 1989, the U.S. economy created more than 20 million new jobs, but employment at the 500 largest companies fell from 16.2 million to 12.5 million, Hale observes. To date in this recovery, though, theres no indication that small companies are offsetting the continued contraction in jobs at large companies. Indeed, recent surveys indicate that only 17% of small companies plan to hire this year, compared with 19% a year ago and 23% in 1990. Hale suggests several reasons for this: First, continued sluggishness has made small companies extra cautious. Second, small businesses depend on banks, which are constrained by tight lending standards, for credit. Third, exports have rebounded since 1988, but small firms have limited experience in exporting. Finally, says Hale, small businesses may be concerned about costly health care and burdensome federal regulations.
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