SMALL BUSINESS RIDDLE
Rhode Island Private Sector Employment, 2003
(Source: RI Department of Labor and Training: http://www.dlt.ri.gov/lmi/es202/size.htm)
What exactly does this mean? Is Rhode Island far ahead of the world in terms of utilizing robots? Do we believe in and rely on ghosts, especially those with substantial job skills? Is this truly a jobless recovery for Rhode Island?
When I first came across this table, I was puzzled. What could this possibly indicate? My next step was to contact the Rhode Island Department of Labor and Training (DLT) who promptly provided a solution to the riddle.
The information in this table is ultimately related to firms and establishments that pay Unemployment Insurance. So, in any given year, a number of these entities either go out of business, or still exist but have released all of their employees. The DLT keeps them on “the books” because they might resume business and rehire employees. So, anyone wishing to analyze employers in terms of the number of workers they employ should eliminate the first row of this table. But, if this is done, one must recalculate the percentages for employers (but not employees) based on firms or establishments that actually employ workers.
When this is done, Rhode Island’s concentration of extremely small firms becomes apparent. The table below makes the 0-employee adjustment, showing percentages of firms with different number of employees and the cumulative percentage for each employment level.
Adjusted Rhode Island Private Sector Employers, 2003
Over 87 percent of firms and establishments in Rhode Island have 19 or fewer employees. About 95 percent have fewer than 50 employees. By anyone’s reckoning, Rhode Island is truly a small business state.
This raises two important questions. First, is Rhode Island’s business climate sufficiently geared to the creation of new small firms and expansion by existing firms? Overall, I don’t think it is, but recent efforts by the Economic Development Corporation like Every Company Counts may signify that we are ready to move in that direction. The last question is one I am still mulling: If the overwhelming majority of Rhode Island firms have 20 or fewer employees, how do we judge future success? Is adding a state total of (say) 4,000 jobs, a less than one percent gain, which is usually viewed as a bad thing, all that bad after all?
by Leonard Lardaro