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#Written by David Tam, 1996. #
#davidkftam@netscape.net Copyright 1999#
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David Tam
Wednesday, October 9, 1996.
Business Press Review
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Little, Bruce. "Small firms linked to lower pay". The Globe and Mail.
Friday, October 4, 1996. B1. ------------------
A Statistics Canada study of the manufacturing sector has concluded that
small companies pay employees less than large companies. It suggests that this
may be the reason why small firms are seen as the major source of employment
growth in this sector. According to the study, companies employing less than
100 workers are falling behind firms with more than 500 workers, in terms of
wages and productivity. This problem is compounded by the fact that most
companies are moving towards outsourcing specific manufacturing jobs to
smaller, specialized companies. Outsourcing in such a way may seem to be
beneficial to companies, but this might not be good for the economy, as
consumer spending power decreases. Another reason for this trend is that the
current economic situation puts pressure on downward wage flexibility for those
searching for new jobs. By comparing factors such as employment and factory
shipments, the study finds a decrease in small company productivity in
comparison to medium and large-sized companies. A comparison of productivity
based on these criteria show that small manufacturing firms are between half
and three-quarters as productive as their larger counterparts. Between 1973
and 1992, small plants increased their share of factor employment from 28.8% to
37.9%, but output of factory shipments only rose from 24.4% to 25.9%. On the
other hand, large plants decreased their share of employment from 32% to 24.8%,
but only decreased output from 37.3% to 34.3%. Though small manufacturing
companies are an important provider of jobs, they might contribute
proportionally to the gross domestic product.
I think this article has revealed some important findings for the
entrepreneur. Small manufacturing businesses must work hard at keeping
productivity high, and providing proper remuneration to employees. This is a
challenge entrepreneurs will have to face when they try to compete with large
companies in this sector. Small businesses do not have the same resources as
large companies. However, small businesses are more dynamic than larger ones,
and are able to "turn on a dime". Once they realize the problem, they should
be able to remedy this situation quickly. While many positive facts about
small business have been brought up in the lectures on the Canadian business
environment,(such as share of employment, share of job creation, and growth
rates), this article brings up some negative aspects. This new revelation
helps balance the arguments, keeping things in perspective. We can also see
that focusing on employment figures alone does not give us a complete view of
the Canadian economic and business environment. For a better picture, we must
also look at productivity, wages, value-added to products and services, the
technology applied, GDP, the social environment, political environment,
export/import figures, R&D spending, taxation, and much more.
(
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