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The term "small business" covers a range of seven different size categories, ranging from a two-person mom-and-pop grocery store to a factory with nearly 500 employees.
Which is why researchers at the U.S. Bureau of Labor Statistics chuckled when we asked them about a statement Ohio House Speaker William G. Batchelder made about small businesses creating new jobs.
Appearing on WCPN 90.3 FM’s "Sound of Ideas" program, Batchelder noted the importance of small businesses in Ohio’s economy.
"Seventy-five percent of the jobs created in the state of Ohio are created in small business. They are not created by huge corporations and those who are very wealthy," Batchelder said.
PolitiFact Ohio thought that sounded interesting and we put the Truth-O-Meter to work.
We started by contacting the Bureau of Labor Statistics. Researchers there cited statistics that showed 99 percent of all private sector companies in the United States are considered small businesses, according to the definition used by the Small Business Administration. It categorizes any firm that employs 499 or fewer people as a small business.
Traditionally, the number of people employed by small businesses has been about the same as the number who work for businesses of 500 people or more, said Brian Headd of the SBA’s Office of Advocacy. That category would include large factories, like auto plants and steel manufacturers.
As of last year, the majority of workers had tipped toward small businesses, which employed just under 55 percent of the nation’s workforce, the BLS’s most recent statistics showed.
We also checked with Batchelder’s office about the source of the speaker’s statement. Spokesman Mike Dittoe gave us two: The National Federation of Independent Business’s Ohio office in Columbus, and a March 2010 report prepared by Headd titled, "An Analysis of Small Business and Jobs."
Roger Geiger, NFIB/Ohio’s executive director, both confirmed Batchelder’s statement and also referred us to the Headd report.
Headd also echoed Batchelder’s sentiment that small businesses are important to the nation’s economic health. He points out how one in five employees at small firms work part-time, and how a greater percentage of Hispanics, high school students, disabled, elderly, and rural employees work at small businesses.
Headd also noted that more than half of all companies start out small, stay small and close after a few years, accounting for 85 percent of job turnover in the country -- which is not necessarily a bad thing. Headd considers the hefty job changes experienced in small businesses to be beneficial and a natural outgrowth of a healthy economy.
"Although job turnover can be an emotional roller coaster for individuals, small firm job flows are a boon to the economy," Headd wrote in his report. "This churning represents the economy’s constant evolution from outmoded processes and industries to more productive ones," a process he calls "creative destruction."
Headd sees small businesses as key to the nation’s recovery from the recession of 2009.
"With the labor market struggling in recent years, small businesses are a logical group to look to for job recovery as they have such a large role in net job creation," he wrote.
BLS researchers confirmed that their most recent statistics indicated that 75 percent of all new hires nationwide were made by small businesses in the second quarter of 2010. Over the past eight years, small businesses made 65 percent of all new hires in the United States, they said. And of small business job creation, nearly three out of four new workers were hired at companies with less than 20 employees.
But what about Ohio? Do the state’s small businesses mirror the national trend?
Benjamin Johnson of the Ohio Department of Job and Family Services had data from the federal government on the most recent statewide breakdown, by county, of the total number of workers employed in Ohio, but could not provide specific information to verify Batchelder’s claim that "75 percent of the jobs created in the state of Ohio are created in small business."
Geiger, in the Ohio office of the National Federation of Independent Business, didn’t have Ohio-specific data either.
And the BLS told us they didn’t track that data, either. But researchers there made a point of saying they were sure Batchelder’s statement was essentially correct. As one pointed out: 99 out of 100 employers are classified as small businesses, so saying 75 percent of all new jobs in Ohio are created by small businesses is hardly different than saying ALL businesses create ALL jobs.
So the experts who deal with labor statistics back up Batchelder’s claim, but we also note that the absence of specific data on Ohio jobs is a point that provides clarification. On the Truth-O-Meter we rate Batchelder’s statement as Mostly True.
"The Sound of Ideas" on WCPN 90.3 FM, "Meet the Speaker," Jan. 4, 2011
Brian Headd, the Small Business Administration Office of Advocacy, "An Analysis of Small Business and Jobs," March 2010
U.S. Bureau of Labor Statistics, Business Employment Dynamics, Second Quarter, 2010
U.S. Bureau of Labor Statistics, Overview of BLS Statistics on Employment
Small Business Administration, Office of Advocacy: "The Small Business Economy, 2010: Report to the President,"
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