Small Employers and Good Jobs: Opportunities and Constraints

Small Employers and Good Jobs: Opportunities and Constraints 

July 26, 2022

OVERVIEW

  • Economic mobility, racial equity, and the related issue of job quality have taken on an even greater sense of urgency in the wake of the stark disparate impact of the health and economic crises brought on by the COVID-19 pandemic. Against this backdrop, the balance of power in the labor market is shifting toward workers.


  • Government agencies and non-profit organizations with support from philanthropy are responding by developing job quality standards, metrics, and support tools. These efforts are groundbreaking and important, but without meaningful engagement with employers to understand constraints and opportunities, the standards, measures and tools run the risk of falling flat.


  • Reimagine Main Street, a project of the Public Private Strategies Institute, partnered with Common Future to field a national survey of small employers in November 2021 to provide insights into how small employers think about the labor market and job quality.


Why Small Employers?

  • According to US Census data, more than half (52%) of the nation’s 134 million employees work for firms with fewer than 100 employees.1 Getting job quality right for this segment of businesses is critical.


  • Low-income workers are disproportionately employed by small companies: According to Gallup, 65% of workers in the bottom income quintile of their large national sample work for a firm with fewer than 100 employees. And these workers are more likely to be Black or Latino/a.


  • Small employers are qualitatively different from large employers. Generally, these businesses have less capacity and their leaders have more limited bandwidth. The CEO of a small employer is likely to be the “Chief Everything Officer.”


What we found:

1. Small employers see their primary value proposition as “flexibility” & “trust”


2. Small employers are frequently in the same financial boat as their workers


3. Small employers generally employ people of the same race or ethnicity


4. The financial health of workers is better when business performance is strong


5. Often just making payroll presents a challenge. Business performance drives compensation levels and tight margins constrain wage growth, especially for most Black and Latino/a small employers


6. Small employers see benefits as worker incentives, but say offering them is cost prohibitive


7. Business owners are likely to manage human resources decisions directly, creating an opening to persuade -- and a constraint on bandwidth


    What we Found

1. Small employers see their primary value proposition as “flexibility” & “trust”


2. Small employers are frequently in the same financial boat as their workers


3. Small employers generally employ people of the same race or ethnicity


4. The financial health of workers is better when business performance is strong


5. Often just making payroll presents a challenge. Business performance drives compensation levels and tight margins constrain wage growth, especially for most Black and Latino/a small employers


6. Small employers see benefits as worker incentives, but say offering them is cost prohibitive


7. Business owners are likely to manage human resources decisions directly, creating an opening to persuade -- and a constraint on bandwidth

What It Means

 The survey results illuminate how business performance shapes job quality, and point to three strategies to ensure that small employers can be the source of good jobs: 


  • Invest in accelerating growth and increasing profitability of small businesses, especially those that employ Black and Latino/a workers


  • Create incentives for already strong small companies to strengthen job quality


  • Stimulate market and policy innovation to make affordable benefits available at scale.

Thank You to Our Survey Partners

Share by: