What Really Creates Jobs? Pt2: Small Business

Tuesday, September 27, 2011

Yesterday we discussed manufacturing, today we look at small business. How many jobs are actually created? Our guest is, Greg David, Director of Business & Economics Reporting Program at CUNY Journalism School.


Greg David

Comments [22]

Thanks to Jeffrey from UWS for his comment.

It seems odd that few if any reporters or Prof. David mention a basic questionable conflation - is an owner necessarily a "job creator." He may have bought the company/partnership or he may have started it or . . .

The simpler the question, the more complicated the reporting may become, but also it may become more informative & factual.

Sep. 27 2011 12:30 PM
Michael D. D. White from Brooklyn Heights

Before we proceed too far in being snide about what a “small” business really is and whether at up to 500 employees they might be considered larger than most people think, perhaps someone should weigh in with a few words about what is being talked about on the other side, just how “large” are the businesses that are the “large” businesses (that perhaps by the statistics offered NOT producing so many jobs). Specifically, how “large” are the very large conglomerates that own so much in the economy and how much of the economy do they control?

For instance, in his book “Cornered” Barry C. Lynn discusses things like how all of the supermarket shelf space devoted to stocking beer is controlled by just two companies notwithstanding the multiple brand names on the shelf or that small companies may be starting micro-breweries.

Another point regarding Greg David’s assertions that because small business owners are often filing as Subchapter S corporation’s their ability to invest in their corporations would be affected by higher personal income tax rates: Those higher tax rates would be AFTER adjustments to calculate adjusted gross income. David seems to imply that these small business owners might be taxed on their income BEFORE their business expenses were taken into account. That would be true only to the extent that money reinvested in their businesses was all required to be treated as income first and not deductible when spent on the business.

Sep. 27 2011 12:04 PM
John A.

Immelt's predecessor was Jack Welch, "Neutron Jack", one of the biggest destroyers of jobs in US history.
Yesterday's topic, but still, people could very much enjoy hearing Germany compared with the US. We gave up on manufacturing too easily.

Sep. 27 2011 11:48 AM
Fuva from Harlemworld

This discussion is great; this kind of examination of theories/ canards underlying the political rhetoric is critical. But it doesn't really get to a/the critical underlying problem with this economy -- income inequality. More than analyzing if small business create jobs, I'd apprecaite examination of who small business owners are and from what economic classes they originate, as an analysis of the state of socioeconomic mobility.

Sep. 27 2011 11:47 AM

If an "S" Corporation doesn't have enough sales demand to hire more people, will he/she really care about his tax situation?

After all reduced sales = lower taxes.

That's why businesses have a history of hiring people AFTER consumer demand goes up.

Sep. 27 2011 11:43 AM
Jeffrey from upper west side

Wealthy people own the businesses, BUT it's consumer demand, not extra money in the company owner's pocket, that creates/requires new jobs.

Sep. 27 2011 11:40 AM
Joe Mirsky from Pompton Lakes NJ

I own a very small business. I'm a Sub S corporation like many mom and pop operations. I pretty much do everything myself; I only created one part-time job.
In a Sub S corporation, you pay yourself a regular wage with all the payroll deductions, but any profit after that is taxable income to you as a distribution. You pay income tax but no employer taxes on distribution income. You have to pay yourself a reasonable wage, though, or the IRS will make you do that.
The pre-Bush tax cut top rate that all the brouhaha was about was 39.6%, versus 35% now, 4.6% more on incomes above $379,150. Should I be so fortunate as to make more than that fortune, I'd be too busy living happily ever after to worry about that extra 4.6%.
But if I wanted to avoid the extra tax, I could just invest in a tax deductible expense like new machinery or — gasp! — a new employee. The incentive is exactly the reverse of that Republican taxes are job killers shibboleth.
However, extra tax would make it harder to invest in new inventory, which is not tax deductible.
I was listening to the Brian Lehrer Show (July 12, 2011) when a caller crystallized the whole thing for me. He said, as an aside to the main discussion, that he was one of those small business "job creators" with 85-110 employees and in 35 years he had never hired or fired anyone because of taxes or tax rates. If business was good and he needed people to do the business, he hired them. If business was bad he would downsize by attrition or layoffs.
Not that it matters much. The average income of Sub S corporations in 2007 was about $100,000 on sales of $1.5 million, well below the top tax bracket before or after the Bush tax cuts. Only two out of 19 major industry sectors earned more, mining and holding companies. The average income for retail was $63,000.

Sep. 27 2011 11:39 AM

Hey Wall St. protesters, shut down wnyc.

Sep. 27 2011 11:38 AM
Donna from NYC

13.5 million people are officially unemployed. Google created 6,000 jobs - so what?

Sep. 27 2011 11:37 AM
antonio from bayside

I don't think China is the problem. It's the US corporations insatiable appetite for profit margin.

Sep. 27 2011 11:35 AM
Phil from Park Slope

Edward: Yes! No one in the media, and certainly no one on the right, questions this absurd line of reasoning.

Sep. 27 2011 11:34 AM
Chet from NJ

IMMELT - GE Chairman, few days ago said on TV that he’s clients are in China so he has to ship the manufacturing there. Well, Chinese clients are in the USA, are they manufacturing here??? Remove Immelt from “advising” OBAMA!!!

Sep. 27 2011 11:33 AM

What about security? Small business' also close as fast as they open. A job in a small business probably won't provide the kind of employment security your average person is hoping for.

Sep. 27 2011 11:33 AM
Phil from Park Slope

What about large companies that eliminate their internal departments to cut benifit costs, then hire contractors (many of them the same people) to do the same jobs? They're not really new jobs. A lot of this has happened in the entertainment industry over the past decade.

Sep. 27 2011 11:32 AM
Jack Jackson from Central New Jersey

To continue yesterday's example a little further....Which has a greater impact on aggregate demand (and therefore GDP) 100,000 $20/hr jobs - US hourly average wage OR one hundred $100/hr jobs in design/finance/etc.

It's not just about letting the cheapest market rule. It also is what you do with the labor surplussed by that cheaper factor. As long as US workers end up unemployed - and not trained or educated to provide new value then our economy is worse off.

Finish the metaphor.

Sep. 27 2011 11:30 AM
Sheldon from Brooklyn

Manufacturing does create jobs. However, "skilled" manufacturing is the way to go for the US - Look at the German model - They still make things and make them well. Making Ipads and T-shirts should stay in China. Heavy Equipment and sophisticated medical devices can still be made here.

Sep. 27 2011 11:30 AM
Edward from NJ

The conservative dogma is that higher taxes prevent small businesses from creating jobs. How can this be true? If I own a business, I don't pay corporate or personal income taxes on the money that goes to payroll. It's an expense and reduces my profit or income. If anything, higher taxes should be an incentive to hire employees.

Sep. 27 2011 11:29 AM
Donna from NYC

"Scott MacFarland
I do think Mr. David has missed the point with regard to concern over manufacturing jobs"

I am with Scott on this one. Didn't have time to comment yesterday but who exactly does he expect to use the "services" we produce? And there are a lot of people in this country that aren't cut out for anything other than a manufacturing job. Not all people are cut out to be - what? -financial analysts? Whose finances are these people going to analyze if everyone else is unemployed?

Obama is right on this one, we need to start making things again and we all need to buy American until we get on our feet again. Time to circle the wagons!

Sep. 27 2011 11:10 AM

speaking of jobs
while the current unemployment rate for the nation is +9%
for those with a college degree the rate is less than 5
maybe people need to get back to school. stop waiting of the corporations to hire your unskilled butt back or move to china that's where they are hiring unskilled labor.

Sep. 27 2011 10:56 AM
tim from tribeca

Greg David proves my point about the value of "craft", of learning to actually make things. if you don't, you wind up like this guy.
also, it is unethical to be neutral on chinese products because of the way the government treats workers, the environment, dissidents, and intellectual property rights.

Sep. 27 2011 10:48 AM

Wasn't there a study recently that found that more jobs were produced by startups as opposed to small businesses as a whole?

If so, the emphasis on a larger group may well be ineffective.

Sep. 27 2011 10:41 AM
Scott MacFarland

I do think Mr. David has missed the point with regard to concern over manufacturing jobs. The concern is not due to romanticizing such jobs, it's that jobs with decent pay are disappearing from the U.S

Not everyone is cut out to work in an office. Good manufacturing jobs gave people a shot at the middle class and that helped our economy. Auto workers, steel workers and others working in manufacturing had the income to buy homes, cars, TV's etc. That spending led to growth.

If politicians are somehow romanticizing such work it is simply more evidence that they are out of touch with reality. The loss of well paid manufacturing jobs is a real concern with very practical impact on our economy.

Sep. 27 2011 09:07 AM

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