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Employers Large and Small.

Public policy for small firms

Employers Large and Small. By Charles Brown, James Hamilton, and James Medoff. Cambridge, MA, Harvard University Press, 1990. 109 pp.

In Employers Large and Small, Charles Brown, James Hamilton, and James Medoff challenge popular perceptions about the role of small businesses in the U.S. economy. The authors analyze several arguments that have been used in favor of promoting legislation for small firms. They discuss whether small firms are responsible for the majority of new jobs in the United States, and analyze the working conditions in these jobs. Finally, they analyze the political power of small firms, and whether current legislation is biased against these firms.

A 1981 study by Public Interest magazine indicated that small businesses create 80 percent of the jobs in the United States, a figure that has been frequently cited over the last 10 years. The authors analyze the data behind that statement, casting doubt on the extent to which small firms fuel the economy. With 3 of 5 businesses failing within the first 5 years, the benefits of job creation by small firms may be overstated. Data from the U.S. Small Business Administration show that about 40 percent of the jobs in small businesses in 1980 no longer existed in 1986.

The authors argue that jobs in small firms may be less desirable than those in large firms. The 1983 Current Population Survey shows that firms with more than 100 employees pay 37 percent higher wages than do firms with fewer than 100 employees. Similarly, small firms are less likely to offer insurance, vacation, or pension plans. About three-fourths of workers without health insurance coverage work for firms with fewer than 500 employees.

The book presents data suggesting that small firms cannot offer the quality of working conditions provided by large firms. Workers in small firms generally receive less training than do workers in large firms. Data from the 1980 Labor Turnover Survey indicate that workers in small firms were more likely to voluntarily change jobs.

Several studies have indicated that small firms have less effective political resources compared with larger firms, and thus the laws generally favor the large firm. One study determined that only seven political action committees worked specifically for the interests of small business, and their combined resources are miniscule. The authors dispute this study's findings, arguing that the combined strength of small business lobbies and trade lobbies allow small businesses to exert considerable influence. One example is the defeat of the "lemon law" that would have required car dealers to provide information on known defects of automobiles. This bill would have primarily affected small employers.

The authors present studies on Federal regulations to show the influence of small firms on U.S. public policy. Many of the most costly regulations in the United States do not apply to the smaller firms. In 1981, at least 43 regulatory programs excluded firms below a certain size. For example, the Equal Employment Opportunity Commission does not require firms with fewer than 100 employees to file reports on hiring practices and the Occupational Safety and Health Administration exempts firms with fewer than 20 employees from routine inspections.

Employers Large and Small recommends that governments at all levels use caution when passing legislation favorable to small business. What may be helpful for the small business owner may be harmful to workers in small firms. Increasing the number of workers employed by small firms may reduce the level of wages and benefits in the United States. The authors do not single out small business as a villain; they merely assert that policymakers must rely on data, rather than popular perceptions, when drafting laws that affect employers of any size.

--Jason Ford

Division of Occupational Pay and Employee Benefit Levels Bureau of Labor Statistics
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Leman, Amy and Martin E. Personick,
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Personick, Martin E. "Safety and Health
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Industry and government
Bachtach, Peter and Aryeh Botwinick,
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Industrial relations
Arthur, Jeffrey B., "The Link Between
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- tions Review, April 1992, pp. 488--506.
Ballot, Michael, Labor-Management Rela
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Budd, John W., "The Determinants and
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Eaton, Adrienne E., Michael E. Gordon,
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Wunderlin, Clarence E., Jr., Visions of a
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Brimble, Raymond J., ed., Global Texas:
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Brunello, Giorgio, 'The Effect of Unions
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French, John D., The Brazilian Workers'
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Galenson, Walter, Labor and Economic
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Jones, Derek C., "The Transformation of
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Schmid, Gunther, Bernd Reissert, and Gert
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- tional Comparison of Financing Sys
- terns. Detroit, MI, Wayne State
 University Press, 1992, 314 pp. $39.95.
Labor force
Ginsburg, Helen, "Changing Concepts of
 Full Employment: Divergent Concepts,
 Divergent Goals," in Persisting Unem
- ployment: Can It Be Overcome? David
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Knouse, Stephen B., Paul Rosenfeld, and
 Amy L. Culbertson, eds., Hispanics in
 the Workplace. Newbury Park, CA, Sage
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 cloth; $21.95, paper.
Magrath, Allan J. The 6 Imperatives of
 Marketing: Lessons from the World's
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 division of American Management
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Melendez, Edwin, Clara Rodriguez, and
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Spendolini, Michael J., The Benchmarking
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 2397), Stock No. 029-001-03121-1. $6.
 For sale by the Superintendent of Docu
- ments, Washington 20402-9328 or from
 the Bureau of Labor Statistics, Publica
- tion Sales Center, P.O. Box 2145, Chi
- cago, IL 60690.
Labor and economic history
Woliner, Craig, Electrifying Eden: Portland
 General Electric 1889-1965. Portland,
 Oregon, Historical Society, 1990, 325
 pp. $24.95.
Labor market
Layard, Richard, Stephen Nickell, and
 Richard Jackman, Unemployment:
 Macroeconomic Performance and the
 Labour Market. New York, Oxford
 University Press, 1991, 618 pp. $92.
Register, Charles A. and Donald R. Wil
- liams, "Labor Market Effects of Man
- juana and Cocaine Use Among Young
 Men," Industrial and Labor Relations
 Review, April 1992, pp. 435-48.
Management, organization theory
Lefkoe, Morty, "Unhealthy Business,"
 Across the Board, The Conference
 Board Magazine, June 1992, pp. 26-31.
Levesque, Joseph D., The Human Resource
 Problem-Solver's Handbook. New
 York, McGraw-Hill, Inc., 1992, 528 pp.
Niehaus, Richard J. and Karl F. Price,
 Bottom Line Results from Strategic
 Human Resource Planning. New York,
 Plenum Press, 1991, 318 pp. $75.
Social change
Moen, Phyllis, Women's Two Roles: A
 Contemporary Dilemma. New York,
 Auburn House, an imprint of Green
- wood Publishing Group, Inc., 1992, 172
 pp., bibliography. $45, cloth; $16.95,
Social institution
Jentz, Gaylord A., Texas Family Law. 7th
 ed. Austin, University of Texas at Aus
- tin, Bureau of Business Research,
 Graduate School of Business, 1992, 179
 pp. $15, paper.
Wages and compensation
Abowd, John M. and Francis Kramarz, A
 Test of Negotiation and Incentive Com
- pensation Models Using Longitudinal
 French Enterprise Data. Cambridge,
 MA, National Bureau of Economic
 Research, Inc., 1992, 40 pp. (Working
 Paper, 4044.) $5 per copy, plus $10 for
 pestage and handling outside the United
COPYRIGHT 1992 U.S. Bureau of Labor Statistics
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1992 Gale, Cengage Learning. All rights reserved.

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Author:Ford, Jason
Publication:Monthly Labor Review
Article Type:Book Review
Date:Sep 1, 1992
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