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Missouri outpaces neighbors in business growth

Missouri outpaces neighbors in business growth

Small businesses account for two-thirds of state's private employers

September 25th, 2016 by Rebecca Martin in Missouri News

Small businesses in Missouri employ a large part of the private sector workforce, according to a 2015 survey by the Missouri Department of Economic Development. As shown in the agency's chart above, forty-five percent of private sector employees work for a small business, defined as having less than 50 employees.

Missouri's business community saw a net growth of more than 8,700 private-sector employers in 2015, a 5 percent gain over the previous year, according to a report released by the Missouri Department of Economic Development (DED) last week.

The net growth should come as little surprise, as Missouri led the nation in new business creation, with 18,342 new businesses formed in 2013, the most recent year's U.S. Census data available.

"More and more companies and entrepreneurs are seeing the many benefits of starting or growing their business in Missouri," DED Director Mike Downing said in a news release. "Our low taxes, competitive business incentives, top-notch talent, access to resources and high quality of life make it the perfect location for businesses to thrive."

The report was produced by the Missouri Economic Research and Information Center (MERIC) using state unemployment insurance data, as well as the Quarterly Census of Employment and Wages, a cooperative program between the U.S. Bureau of Labor Statistics and the state labor market information centers.

Small businesses with 10 employees or fewer accounted for more than two-thirds — 77 percent — of Missouri's roughly 182,000 private-sector employers in 2015. Businesses with between one and 49 employees accounted for 95 percent.

Those small Missouri businesses appear to be the real job creators, adding at least as many jobs as their big-business counterparts — businesses with one to nine employees added 10,149 new jobs in 2015, while businesses with 500 or more employees added 9,696 jobs.

"I don't think the general public really realizes what an impact the small business community has," said Brad Jones, Missouri director for the National Federation of Independent Businesses. "The overall percentages that you're seeing of the small-business sector, as it appears on the whole, is really pretty consistent."

Small businesses employing 20-49 people added the most jobs, with 13,224. Overall, Missouri businesses increased employment by nearly 51,800 jobs in 2015.

Jones said while many factors are at play in the state's business climate, Missouri's corporate tax structure and business-friendly initiatives likely contributed to last year's growth.

"When you're talking about economic development, it's a mix of things," Jones said. "Overall the entrepreneurial climate in Missouri is probably better than some of our surrounding states. You're seeing cities like St. Louis and Kansas City that are being listed as entrepreneur-friendly, incubator programs that are successful in those two cities and other places around Missouri. I think that makes a difference."

Maybe that's why Missouri's private-sector employer growth was almost double that of any of its surrounding states in 2015.

Missouri's private business growth of 3.9 percent in 2015 (according to the Bureau of Labor Statistics, whose numbers vary slightly from MERIC's) was rivalled most closely in its neighboring states by Tennessee's 2.5 percent growth.

While small businesses account for the majority of Missouri's private employers, they continue to pay significantly less than larger employers. Wages were highest at businesses with 1,000 or more employees — $70,533 on average, 53 percent higher than the state's $46,001 average wage — while businesses with five to nine employees had the lowest average wage at $36,468.

"This report definitely shows that small-business owners are making less, of course, than those that have larger companies," Jones said. "The fact is that, no, every small-business owner is not a millionaire, and they're making a (lower) average wage and probably spending double the hours to make that."

For the full report, access https://www.missourieconomy.org/pdfs/mo_businesses_by_size_brief_2015.pdf.