My mother, father, and brother were all economics majors. I went another direction- but I still find the subject of economics fascinating- seeing it as I do from the perspective of a non-economist. And it fascinates me to think that people call this a science. Well, I was a physics major. I think you have to be able to do experiments to prove or disprove things. Anyone can tell a good story.
I was listening to an economist on the news today lament the fact that last quarter's productivity had not made good gains. He said that this was the only reason that, with the GDP growth as low as it was, there was still upward force on wages. Basically, workers weren't productive enough to make themselves unnecessary. And he went on to say that if we had too many quarters of wage growth then eventually manufacturers would have to start passing on some of the costs to consumers, and we would get inflation- a bad thing.
Well, all else being equal, inflation is a bad thing. But we are not just consumers, we are workers. Inflation due to wage inflation is probably easier for workers to handle than inflation due to commodity prices skyrocketing in the absence of wage growth or devaluation of the currency. All inflation is not equal. And workers could use some wage growth.
Then last night my mother started ranting about government regulation and how it kills small business (she watches too much FOX news and gets irate about things that do not directly affect her). She said- and I have heard it many times before- that the majority of new jobs are created by small business. I wondered if it was still true in today's economy, and if so, then what is so special about small business.
So I looked up some statistics. It is true- over the last decade or so, small business contributed to 64 percent of all new jobs. So you would expect most people to work for small businesses- they don't. Only 49.2 percent of people work for small businesses. So many of these jobs don't last- just as so many small businesses don't last, I assume. So there is a lot of turnover in these jobs. I guess that is one reason why small businesses create so many new jobs.
Another might be inefficiency. While small businesses hire 49.2 of all workers, they only account for 46 percent of private sector output. So they use labor slightly less efficiently if you are looking at economic dollar output. Perhaps inefficiency results in slightly more jobs. Not really what the Small Business Bureau wants to advertise- but I am all for the inefficient use of labor.
Too much time on my hands today.