Who Are The Job Creators?
MELISSA BLOCK, Host:
While President Obama travels the country pushing his jobs bill, Republicans insist the White House wants to raise taxes on what they call job creators, to pay for the bill. These days, House Speaker John Boehner often remarks: Job creators are on strike.
R: I can tell you the American people - the private-sector job creators - they're rattled by what they've seen out of this town over the last few years.
BLOCK: So with all the talk of job creators, who, exactly, are they? To help us answer that question, we're joined by Justin Wolfers. He's a professor of business and public policy at the University of Pennsylvania's Wharton School. Welcome to the program.
D: Melissa, a pleasure to be here.
BLOCK: And Justin, how would you define job creators in the current economy?
WOLFERS: What's funny about that Boehner quote is, I think we used to call them as - employers. So obviously, there's some political rhetoric here. But, you know, it depends where we are in the business cycle. Right now, there's a lot of hiring going on, for instance, in health, professional business services. And actually, manufacturing has been one of the bright spots as well.
BLOCK: Which is interesting because for so many months, manufacturing jobs were declining. And now there's a little bit of an upturn, right?
WOLFERS: Well, not only so many months, so many years - and in fact, so many decades. So the fact that there's actually increases in hiring going on, increases in the number of jobs in manufacturing going on, is actually historically unusual.
BLOCK: We hear a lot about small businesses being the engine of job growth in that - country. How true is that?
WOLFERS: Categorically false.
WOLFERS: Yeah. In the United States right now, the latest numbers suggest there are about 6 million firms with paid employment. Ninety percent of those are small businesses, which means they have, you know, 20 or fewer employees. Those 90 percent of all firms only make up 20 percent of all jobs. So while there's lot of businesses, there's not a lot of jobs in small business.
BLOCK: Does that depend, though, on how, exactly, you define small business? Because a lot of the numbers coming from the government refer to businesses of 500 workers or fewer, and they say two-thirds of all new jobs are created by those small businesses.
WOLFERS: So it sounds like - I'm actually not aware of the statistic you're referring to. The general sense of what I was just telling you, that small businesses are most businesses but very few jobs, is true no matter what the definition is. I think there is no ordinary sense of the word small business that includes firms with 500 employees. It just doesn't make sense. I regard that as a huge firm - and it would be an enormous factory, for instance. There's also - one needs to be careful about what we mean by creating jobs. So small businesses create a lot of jobs, but they also destroy a lot of jobs.
BLOCK: How so?
WOLFERS: Small businesses, firms that are just starting out, a bunch of them succeed, and a bunch of them fail. If we only count the success, which would be the wrong thing to do, we'd say they create an enormous number of jobs. But, you know, how difficult it is to start a successful small business. And so sure, they're doing a lot of hiring in total. But they're also doing a lot of firing as well.
BLOCK: Interesting, too, that a lot of small businesses are so small that it's essentially one person. It's maybe an independent corporation, or someone who's self-employed could be a small business?
WOLFERS: Yeah. And so this is actually one of the parts where the rhetoric of small business, I think, really leads us astray. If you actually look at the data, what we mean by small businesses, what they actually are, they're things like real estate agents or my hairdresser. They're lawyers; they're doctors. You talk to these folks, do they have any interest in innovating or bringing new products to market or any of the things we think of as being the engine of economic growth? The answer is no. My dry cleaner likes to take my clothes and then give them to me four days later. Most small businesses don't even have ambitions of being the engines of economic growth, or the engines of jobs.
BLOCK: OK. Professor Wolfers, thank you very much.
WOLFERS: You're welcome.
BLOCK: Justin Wolfers is a professor at the Wharton School, at the University of Pennsylvania. He also co-edits a series of papers on economic activity for the Brookings Institution.
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