The U.S. Small Business Administration's Office of Advocacy, Office of Economic Research, annually reports the latest data available on employees of small businesses, employee benefits, and business owner characteristics. Advocacy distributes this document to SBA staff, congressional staff, and others interested in small business issues. This publication is a supplement to the annual, The State of Small Business: A Report of the President.

The Office of Economic Research within the Office of Advocacy supports small business research by defining small business contributions, evaluating small business vital signs, determining regulatory impacts on small businesses, and monitoring the financing of small businesses. To achieve these four endeavors, the Office of Economic Research funds and designs data collection, develops reports on the data, funds research, disseminates reports and data for policy making decisions and further research, and answers small business questions raised by the general public, small businesses, the media and Congress.

Characteristics of Small Business Employees and Owners analyzes the demographic characteristics of small businesses. Highlights include:

• Of the 5,369,068 employer firms in 1995, 78.8 percent had fewer than 10 employees, and 99.7 percent had fewer than 500 employees.
• Small firms (fewer than 500 employees) employed 56.5 percent of the 99.2 million private sector employees in 1996.
• Part-time employment was 20.5 percent of the small firm work force, and 17.4 percent of the large firm work force in 1996.
• Small firms employed a higher percentage of workers under age 25 and workers aged 65 and over than did large firms in 1996.
• Of small firm workers, 53.7 percent had an education of high school degree or less, compared with 44.3 percent of large firm workers in 1996.
• The percentage of full-time employees in small firm employer pension plans increased 12.9 percent from 1992 to 1996.
• Of the 11.3 million self-employed individuals with earnings in 1996, 37.4 percent were women, 6.0 percent were black, 5.9 percent had Hispanic origins, 54.5 percent were aged 35 to 54, 75.1 percent earned less than $25,000 and 43.0 percent were in service industries.
• Of all of the firms in 1992, 73.0 percent were started by original founders, compared to 29.8 percent for businesses with 100 or more employees.
• Of the firms without employees in 1992, 27.0 percent were started within the last two years, compared with 9.7 percent of firms with 1 to 4 employees.
• Of all of the firms in 1992, 56.5 percent were home-based when first established, 3.1 percent were franchises, and 75.5 percent of the businesses in 1992 survived until at least 1996.

Information about the characteristics of small business workers and their employee benefits is important for analysis of current legislation. Policymakers are already looking to small businesses as a driving force in making welfare to work a success. With small businesses being the job creators, and, as this report indicates, often the employers of individuals on public assistance, it is believed that this objective will be met. With regard to employee benefits, legislation may be needed to remove obstacles that continue to hamper small business efforts to provide pension and health care benefits.

This report also contains data from the recently released Characteristics of Business Owners, 1992 (CBO). The CBO contains the latest officially available data on small business owners (sub-categories also exist for woman and minority business owners) from the Bureau of the Census.

Small Business Employee and Owner Characteristics is prepared in the Office of Economic Research under the general supervision of Bruce D. Phillips, director of the Office of Economic Research. The detailed text and tables were prepared by Brian Headd. Comments on the contents of this report may be directed to the Office of Economic Research at (202) 205-6530. Visit the Office of Advocacy's world wide web site at http://www.sba.gov/ADVO/ for additional information about small businesses.

Jere W. Glover

Chief Counsel for Advocacy

U.S. Small Business Administration

January 1998

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TABLE OF CONTENTS

1. Overview
2. Data Sources
2.1. Employee Characteristics and Employer Benefits
2.2. Business Owner Characteristics
3. Employee Characteristics
3.1. Female and Minority Employee Participation
3.2. Age Distribution of Full-Time Employees
3.3. Part-Time Employment
3.4. Employee Educational Attainment
3.5. Employees on Public and Financial Assistance
3.6. Occupation Distribution
3.7. Employee Wages
4. Employer Benefits
4.1. Pension Plans
4.2. Health Insurance
5. Business Owner Characteristics
5.1. Characteristics of the Self-Employed
5.2. Characteristics of Business Owners

Appendix A: Tables (Tables by Employment Size of Firm for 1992-1996 unless noted) (To view the tables, download the tables file)

Table 2.1

Number of Employees for Private Firms	A-1
Table 3.1	Employee Characteristics	A-2
Table 3.2	Age Distribution of Full-Time Employees	A-3
Table 3.3	Part-Time Employment	A-4
Table 3.4	Employee Education Level	A-5
Table 3.5	Employees on Financial and Public Assistance	A-6
Table 3.6	Occupation Distribution of Full-Time Employees	A-7
Table 4.1	Employer Pension Plans	A-8
Table 4.2	Health Insurance	A-9
Table 5.1	Characteristics of the Self-Employed	A-10
Table 5.2	Distribution of Owners by Owner Characteristic, 1992	A-11
Table 5.3	Age Distribution of Owners, 1992	A-12
Table 5.4	Method Business Was Acquired, 1992	A-13
Table 5.5	Distribution of Businesses by Start Year, 1992	A-14
Table 5.6	Distribution of Firms by Owner Characteristic, 1992	A-15
Table 5.7	Firm Characteristics, 1992	A-16
Table 5.8	Business Survival Rates,1992-1996	A-17

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1. Overview

Characteristics of Small Business Employees and Owners focuses on the people who work for small businesses and the people who hire them. These individuals are compared to the individuals that own and work for large businesses.

Small business contributions to the economy and society include hiring individuals that might otherwise be unemployed. As shown in this report, small businesses hire a greater proportion of part-time employees, employees with lower educational attainment, and individuals that receive public assistance than large businesses. Small businesses also employ a greater share of younger and older workers.

Small businesses also offer opportunities for their owners. Small businesses give the opportunity of ownership to women, minorities, the young and the old, as well as the population in their prime working years.

However while offering opportunities and wages similar to large firms, small businesses offer somewhat fewer benefits. Regulatory requirements associated with offering benefits impose overhead costs that can be spread across a larger base in a larger business, creating lower average costs for larger businesses. Moreover, smaller businesses are more likely to be new and not yet profitable, therefore they are unable to increase costs by offering benefits. Policy initiatives may be necessary to level the benefit playing field in some instances to reduce the burden on small firms offering employee benefits.

For many purposes, the Office of Advocacy often defines a firm with fewer than 500 employees as small. Here, different employment size classes are presented to allow more detailed analysis of businesses by size. In the analysis of business ownership, because non-S corporations (which are often the largest employers) are excluded, the largest employment size class used is the employment size category of 100 or more employees.

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2. Data Sources


2.1. Employee Characteristics and Employer Benefits

Results were extracted for current employees of private firms; that is government employees are excluded. Employee results listed in this report are based on the results of the March Current Population Survey, 1993-1997 (CPS). This survey is a joint project between the Bureau of Labor Statistics and the Bureau of the Census. Most of the results from this survey are listed as percentages in the tables in this report. However, estimates can be calculated using employee figures from Table 2.1 and percents offered by the other tables. Table 2.1 provides the distribution of employment by employment size of firm from 1992 to 1996, in 1996, small firms employed 56.5 percent of the private sector employees.

The CPS survey asks a question about employer size, but inconsistencies in the responses may exist. The question asked is, "Counting all locations where this employer operates, what is the total number of persons who work for …'s employer?" (1.) The respondents (or employees) may not be know the number of locations of the employer and/or the total number of employees. Franchising may also cause data problems, as employees may consider the entire franchise their employer.

While the CPS counts nonfarm workers and the Statistics of U.S. Businesses, also from the Bureau of the Census, counts jobs, comparisons can indicate reporting flaws. The worker-job issue is not large, as the CPS in 1995 reported 96.9 million private sector workers, and the SUSB in 1995 (the latest year available) reported 100.3 million private jobs.(2.) Workers replying to the CPS reported in 1995 that 57.2 percent of them worked in firms with fewer than 500 employees, while employers in the 1995 SUSB reported that 52.5 percent of employees worked in firms with fewer than 500 employees. This indicates that CPS respondents are probably underestimating the size of their employer. Even with the potential problems, the data provide an invaluable, timely view of the characteristics of employees by employer size.

The Statistics of U.S. Businesses also presents the number of firms by employment size of firm. Of the 5,369,068 employer firms (excluding self-employed individuals without employees) in 1995, 78.8 percent had fewer than ten employees, and 99.7 percent had fewer than 500 employees.

This report presents CPS data from the March 1993 to 1997 surveys (the survey often refers to the previous year, however age and education questions pertain to March but are taken as the end of the previous year). Evaluating the data across time can indicate trends; however, small changes may be more a result of the selection of the respondents not actual trends. Comparisons across time indicate that the figures are relatively stable. Unless indicated, the text in this report discusses 1996 figures.


2.2. Business Owner Characteristics

Self-employment figures were also extracted from the March CPS. The self-employment figures represent individuals with any self-employment earnings (positive or negative) in the previous year; most self-employed individuals are unincorporated.

Additional business owner characteristics are available from the Characteristics of Business Owners, 1992 (CBO), produced by the Bureau of the Census, with funds provided by the U.S. Small Business Administration. The latest CBO, covering 1992, was released in late 1997. The CBO is released every five years and is available on the Internet at http://www.census.gov/prod/www/titles.html#econ. The CBO provides extensive details about both business owners and their businesses, but one hundred employees is the largest employment size category. Business owners represent owners of firms that filed business tax forms, excluding non-S corporations, with at least $500 in yearly business receipts. Note that non-S corporations generally have investors, not decision-making owners, and thus this group is not in the CBO survey's universe. However, excluding non-S corporations often excludes the largest employers; making comparisons of small and large business owners difficult.

The self-employment data is timely and the business owner data include owner break outs by employment size of firm. The data differ in that self-employment figures include individuals that file taxes as non-S corporations, and business owner figures exclude owners of businesses with less than $500 in yearly business receipts.

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3. Employee Characteristics


3.1. Female and Minority Employee Participation

Small and large firms hire women in about equal proportions (Table 3.1). Of the small firm work force (fewer than 500 employees) 45.1 percent were women, and of the large firm work force (500 employees or more) 47.5 percent were women. However, within small firm employment categories differences appear. Firms with fewer than 10 employees seem to employ women at a higher rate (48.3 percent) than firms with 25 to 99 employees (42.8 percent). Because small firms employ more of the private work force than large firms, small firms employed more women. Small firms employed 25.3 million women, and large firms employed 20.5 million women.

Larger firms hire a higher ratio of black individuals than small firms (Table 3.1). One potential reason for this difference could be the greater resources of larger firms when implementing affirmative action efforts. Overall, black individuals were 11.0 million of the 99.2 million private workers (11.1 percent). The race category of Asian / Pacific or American Indian / Aleut Eskimo had about equal employment rates in small and large firms. Overall, 4.3 million workers of Asian / Pacific or American Indian / Aleut Eskimo were in the private work force (4.4 percent).

The percent of Hispanic workers in a firm decreases as the employment size of the firm increases (Table 3.1). Very small firms (fewer than 10 employees) had a Hispanic worker ratio of 13.2 percent while very large firms (1,000 employees or more) had an 8.6 percent ratio (62 percent higher for very small firms). Hispanic individuals constituted 6.9 million of the 56.1 million small firm employees (12.3 percent), and 3.7 million of the 43.1 million large firm employees (8.6 percent).


3.2. Age Distribution of Full-Time Employees

For comparisons of the age distribution of workers by firm size, full-time employees were chosen to avoid distortions due to the distribution of part-time employment. Smaller firms had a higher proportion of part-time employment than large firms.

Small firms hire a higher proportion of workers under age 25 and workers age 65 and over (Table 3.2). In 1996, full-time employees under age 25 were 14.9 percent of very small firms (fewer than 10 employees), while they were 10.8 percent of very large firms (1,000 employees or more). This translates to very small firms having a 37.4 percent higher ratio of individuals employed under age 25 than very large firms. In addition, very small firms had over a 100 percent higher ratio of employees over age 65 than very large firms. Figure 1 shows the flow from firms of different sizes for percentages of employment of full-time workers under age 25 and age 65 or older.

In 1996, small firms (fewer than 500 employees) employed about 7.4 million full-time workers under 25, while large firms (500 employees or more) employed about 4.6 million. Small firms employed about 822,000 full-time employees age 65 or older and large firms employed about 410,000.

For wage analysis, the distribution of worker ages for large and small firms needs to be addressed.

Figure 1

3.3. Part-Time Employment

Part-time employment is defined here as working less than 35 hours a week. As shown in Table 3.3, very small firms (fewer than 10 employees) hire part-time employees at a rate almost twice that of very large firms (1,000 or more employees). Very small firms also hire part-time employees that usually work full-time at a rate of about twice that of very large firms.

Overall, 20.5 percent (11.5 million) of small firm workers were part-time employees in 1996, compared to the 17.4 percent (7.5 million) of large firm workers. In addition, small firms employed about 645,000 part-time workers who usually work full-time, while large firms are employed about 326,000.

If small firms did not hire these part-time employees, they might otherwise be unemployed. As with age, the differences in part-time employment by firm size needs to be considered in analyses of wage differentials between small and large firms.

From 1992 and 1996, the gap between large and small firms in the share of part-time workers narrowed. The small firm figure declined every year from 22.2 percent in 1992 to 20.5 percent in 1996, while the large firm share was relatively stable.

Figure 2

3.4. Employee Educational Attainment

Small firms had a higher ratio of employees with lower educational levels (Table 3.4). Small firms (fewer than 500 employees) had a higher ratio of employees with a high school degree or less (18.9 percent for small, and 11.5 percent for large), while large firms (500 employees or more) had a higher ratio of employees with bachelor's and master's degrees. The professional / doctorate category ratios were similar for small and large firms. Figures 3 and 4 illustrate ratio differences in employee educational attainment for very small firms and very large firms.

In 1996, 54.5 percent of the small firm work force (30.5 million employees) had high school degrees or less and 4.7 percent (2.6 million employees) with degrees beyond bachelor's degrees. In contrast, 44.4 percent of the large firm work force (19.1 million employees) had high school degrees or less and 6.9 percent (3.0 million employees) had degrees beyond bachelor's degrees. Small and large firms had similar rates of employees with some college and bachelor's degrees, as small firms had 40.9 percent (22.9 million employees) of their work force in this category and large firms had 48.8 percent (21.0 million employees).

Employee age and industry structure could explain some of the differences between small and large firm employee educational attainment. The fact that small firms have a higher ratio than large firms of employees under age 25 could explain small firms' higher ratio of employees with educational attainments of high school and below. Also, the abundance of small doctors' offices and legal firms may explain why small firms had as large a share of professional and doctorate level employees as large firms.

Overall, small firms are contributing to the economy by hiring some individuals with relatively lower educational levels who might otherwise be unemployed. The differences in employee educational attainment by firm size needs to be considered in analyses of wage differentials between small and large firms.

Note that the educational levels listed in Table 3.4 are those reached by private workers at a point in time. During their lives, many of the workers (particularly younger workers) will reach higher educational levels than those listed in Table 3.4.

Figure 3

Figure 4

3.5. Employees on Public and Financial Assistance

In 1996, small firms employed more individuals on public assistance (assistance received from government sources excluding food stamps and SSI payments) than large firms. With regard to financial assistance (money received from friends or relatives not living in the same household, excluding loans), Table 3.5 shows very small firms (fewer than 10 employees) had a 17.0 percent higher ratio of individuals receiving financial assistance than very large firms (1,000 or more employees) (1.03 percent versus 0.88 percent). Employees of firms with 10 to 24 employees had a 42.0 percent higher ratio of individuals on financial assistance than very large firms.

In 1996, small firms employed about 499,000 individuals receiving financial assistance and 794,000 individuals receiving public assistance. Large firms employed about 388,000 individuals receiving financial assistance and 511,000 individuals receiving public assistance. Small firms are contributing to the economy by hiring more individuals who utilize assistance than large firms. Again, if small firms did not hire these individuals, they might otherwise be unemployed.

Although the small numbers are susceptible to survey instability, from 1992 to 1996 the percent of employees receiving assistance decreased for small and large firms, while overall employment increased. The private sector saw a 14.6 percent drop in financially assisted workers (1.05 percent to 0.89 percent), and a 6.1 percent drop in publicly assisted workers (1.4 percent to 1.32 percent).

Figure 5

3.6. Occupation Distribution

Relative to large firms, small firms have a larger percent of their work force concentrating on making the goods and services for the firm (Table 3.6). Management and administrative support represented 26.3 percent of the work force in small firms, and 31.2 percent in large firms. The ratio of sales positions was similar for small and large firms, as small firms had 11.1 percent of their work force in sales and large firms had 12.3 percent.

Comparing occupation distributions from 1992 to 1996, reveals no major trends; however the data shows a shuffling in administration. There was a small increase in management (from 13.4 percent to 14.8 percent) and a small decrease in administrative support (from 15.2 percent to 13.6 percent).


3.7. Employee Wages

Creating comparable employee wage figures by firm size from the CPS entails various difficulties in attempting to compare similar workers in small and large firms. According to the 1995 SUSB figures, which include full-time and part-time workers, the average small firm worker received $23,291 per year in income while the average large firm worker received $29,662 per year in income. But considering, as indicated earlier, workers in small and large firms are not similar, these figures are not particularly useful.

In addition, comparing average wages across firm sizes is more likely to indicate the productivity of the workers (or return from the employees' labor for the employer), than small and large firms' treatment of their work forces. However, various studies have attempted to compare employee wages across firm sizes.

Richard Boden, Jr., found that in 1993, workers in small firms (fewer than 500 employees) were making, on average, 81.4 percent of the wages made by workers in large firms (500 or more employees).(3.) But employees hired within the previous year in small firms were making 94.9 percent of the wages made by workers in the same class in large firms. Reasons for this difference could include large firms paying a premium to entice more preferable workers, and workers choosing small firms because of potential growth opportunities.

In addition, a study funded by the Office of Advocacy found that, "computer usage was twice as high among employees in the highest wage quartile compared with those in the lowest quartile. This relationship held for all firm sizes and lengths of job tenure." (4.)
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4. Employer Benefits


4.1. Pension Plans

Employees of very large firms (1,000 or more employees) were almost five times more likely to be employed in firms with pension plans than employees of very small firms (fewer than 10 employees) (Table 4.1). As a consequence, employees of very large firms were more than five times more likely to be included in employer pension plans than employees of very small firms. Overall in 1996, 16.8 million workers were receiving pension plan benefits from small firms, and 25.1 million workers were receiving benefits from large firms. Focusing on full-time employees increases rates of pension plan benefits, but yields similar results in comparison of very small firms with very large firms.

Firm size differences in pension benefits could be from small firms' higher average costs for pension plans, and/or new firms (which are almost always small) not yet reaching the stage of maturity where they can offer employee benefits. Firms that grow to an employment size between 25 and 99 employees appear able to surpass the barriers needed to offer pension plans. Educational level differences between small and large firms' work force may also be a contributing factor. Overall, higher levels of pension benefits are correlated with higher levels of education and larger firm sizes (Figure 6).

Figure 6

Small firms however do seem to be slowly catching up to the large firms with respect to pension plans. From 1992 to 1996, the percentage of employees that were had pension benefits in small firms increased from 26.3 percent to 30.0 percent, while for large firms it increased less, from 57.8 percent to 58.2 percent. The gap is closing even more for full-time employees. During the same period, the percent of full-time small firm employees included in firms' pension benefits increased from 30.4 percent to 34.4 percent, while full-time large firm employees increased only slightly, from 66.1 percent to 66.5 percent (Figure 7).

Figure 7

4.2. Health Insurance

Employees of smaller firms were generally less likely to belong to an employer's health plan than employees of larger firms (Table 4.2). Small firms had 47.1 percent of their work force belonging to employer health plans (26.4 million employees), compared with 67.7 percent in large firms (29.2 million employees). Reasons for this difference may be similar to reasons for differences in pension coverage; higher average costs, and/or new firms (which are almost always small) not yet reaching the stage of maturity where they can offer employee benefits. Small firms' higher utilization of part-time employees and employees on assistance, may also mean that a larger number of small firm employees are insured under plans of a close relative or public plan. (5.)

Again, higher benefit levels are correlated with higher education levels, and larger firm sizes (Figure 8). Once firms grow to somewhere between 25 and 99 employees, they seem more able to surpass the financial and regulatory barriers needed to offer health insurance. Or firms may not offer health insurance until they are in business a certain number of years, about the time they reach the 25 to 99 employees size.

Figure 8

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5. Business Owner Characteristics


5.1. Characteristics of the Self-Employed

In 1996, men represented 62.6 percent (7.1 million) and women, 37.4 percent (4.2 million) of the 11.3 million self-employed with earnings (Table 5.1). The self-employment rate for the civilian labor force was 8.4 percent (9.8 percent for men and 6.8 percent for women).

Self-employment levels differed by characteristics. By race, Asian, Pacific, American Indian, or Aleut Eskimo individuals accounted for 4.4 percent of the self-employed, black individuals accounted for 6.0 percent and white individuals accounted for 89.6 percent. By origin, Hispanic individuals accounted for 5.9 percent. By age, 5.7 percent were under 25 and 6.8 percent were 65 or older. From 1992 to 1996, the percentage of self-employed increased for women, Hispanics and all races except white.

Most of the self-employed, 40.4 percent, received less than $5,000 for their business efforts, while only 11.1 percent received more than $50,000. By industry, most of the self-employed were in services (43.0 percent), retail trade (12.9 percent) and construction (12.7 percent).

The self-employment figures declined from 1994 to 1996. Declines were concentrated among individuals that were white, under the age of 35, had high school diplomas or less, and had low self-employment earnings. Many of these individuals may have switched to wage-and-salary jobs.

Figure 9

5.2. Characteristics of Business Owners

The 1992 self-employed characteristics are similar to the 1992 owner characteristics for all employer sizes from The 1992 Characteristics of Business Owners (Tables 5.1 and 5.2). Again, the CBO excludes non-S corporations (often the largest businesses), and tax returns with less than $500 in sales.

In 1992, 80.8 percent of owners in the CBO owned firms without employees. Women, Asian, Pacific Islanders, American Indian, Aleut Eskimo, black, and Hispanic owners were often underrepresented in the larger firm employment size classes. Women owned 35 percent of all firms without employees, but only 16.5 percent of firms with 100 or more employees. The category of Asian or Pacific Islanders / American Indian or Aleut Eskimo constituted 3.4 percent of all non-employer firms, but just 1.7 percent of firms with 100 or more employees. Black-owned firms represented 3.7 percent of all non-employer firms, but only 0.8 percent of firms with 100 or more employees. Hispanic-owned firms were 4.4 percent of all non-employer firms, but just 1.4 percent of firms with 100 or more employees.

The CBO also indicates that in 1992, 90.6 percent of business owners were born in the United States (9.4 percent were foreign born). Note that the native born percentage was higher for the larger firms, 94.5 percent of the owners of firms with 100 or more employees were born in the United States.

Owners in the CBO database were older than those in the CPS, perhaps because the CBO's exclusion of tax returns with less than $500 in annual business receipts eliminating more of the younger self-employed (Tables 5.1 and 5.3). The CBO data do show that only the age categories of 45-54 and 55-64 had larger percentages of owners in the category of firms with 100 or more employees than firms without employees.

How were the businesses existing in 1992 obtained? The CBO shows 73.0 percent of the owners were original founders; 11.1 percent received the firm as a transfer (gift); 10.7 percent purchased the firm; 2.9 percent inherited the firm; and the remaining 2.3 percent acquired the firm in other ways (Table 5.4, Figure 10). Original founders and purchasers are less prevalent in the larger firm employment size classes. In fact, 41.3 percent of the firms with 100 or more employees received the firm as a transfer (gift), 29.8 percent were original founders, 22.5 percent inherited it, 6.3 percent purchased the firm, and the remaining 0.2 percent acquired the firm in other ways.

Figure 10

In 1992, 23.3 percent of the firms were started within the previous two years, and 22.4 percent were started more than 12 years earlier (Table 5.5 and Figure11). The year in which firms were started differed widely between firms with employees and firms without employees. Of the firms without employees, 27.0 percent were started within the previous two years, compared with only 9.7 percent for firms with 1 to 4 employees. While it is not surprising that firms without employees are often younger than firms with employees (i.e. firms without employees have a shorter life span), it is surprising that firm employment size classes of "5 to 9" through "100 or more" are similar in their age ranges. By major industry, the group of transportation, communication, and utilities is the major industry group most represented by younger firms, while the group of finance, insurance and real estate is the industry most represented by older firms.

Figure 11

Firm figures from Table 5.6 are similar to owner figures in Table 5.2 as most firms have only one owner (note that more than one owner can own a firm). Firms of larger employment sizes had more owners per firm; firms without employees averaged 1.1 owners per firm and those with 100 or more employees averaged 2.8 owners per firm.

In 1992, industry differences appeared among the owner types. Women-owned firms were reasonably represented in retail trade (44.1 percent) and service industries (40.6 percent), but underrepresented in the construction industry (10.0 percent). The category of Asian, Pacific Islanders, American Indian, and Aleut Eskimo was best represented in retail trade; black and Hispanic-owned firms were best represented in the combined industry of transportation, communication, and utilities, and white-owned firms were best represented in the combined industry of finance, insurance, and real estate.

Table 5.7 displays firm characteristics by employer size for home-based businesses, franchises, and exporters. Highlights for 1992 include:

• Home-based businesses were 53.4 percent of all businesses, with only a small percent of home-based businesses moving out of the house (figures for home-based when first established and currently home-based do not differ by much), and home-based business rates decline sharply as the firm employment size increases. Major industry figures for 1992 show that construction firms were the most likely to be home-based (81.9 percent), and finance, insurance and real estate firms were the least often home-based (36.0 percent).
• Franchised businesses were 3.1 percent of all businesses, and this figure increases sharply as firm employment size increases. Retail trade firms were most often franchised (8.0 percent).
• Exporting businesses were 1.7 percent of all businesses, and again, the percent of businesses that export increases sharply as the firm employment size increases. The percentage of export sales for most businesses that export is less than 10 percent. Manufacturing firms were most often exporters (9.3 percent of manufacturing firms exported).

More than three-quarters, 75.5 percent, of firms existing in 1992 survived four or more years (until at least 1996) (Table 5.8). Survival rates varied widely for firms with employees and firms without employees. Of firms without employees, 72.4 percent remained in business until at least 1996; the figure was 89.6 percent for firms with 1 to 4 employees. Again, while it is not surprising that firms without employees close more often than firms with employees, it is surprising that firm size employment classes of "1 to 4" through "100 or more" had similar ranges of survival rates. By major industry, the finance, insurance and real estate group had the highest survival rate (82.6 percent) and the transportation, communication, and utilities group had the lowest survival rate (70.9 percent). The major industry figures are probably heavily influenced by the industry ratios of firms without employees to firms with employees.
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1. Employer refers to the employer the respondent was with the longest during the year.
2. The U.S. Department of Labor, Bureau of Labor Statistics, Employment and Earnings, January 1995 reports a multiple jobholders rate of 5.9 percent for 1994 (includes public sector jobs).
3. Boden, Richard, Jr., "Changes in Wages and Worker Attributes by Firm Size, 1983-1993," Business Economics, July 1997.
4. Kochhar, Rakesh, "The Effect of Computer Use on the Earnings of Workers by Firm Size," 1994, Office of Advocacy, U.S. Small Business Administration sponsored research, NTIS Code PB95-239984.
5. For further analysis, see chapter 2 of The State of Small Business: A Report of the President, 1994, (Washington, D.C.: U.S. Government Printing Office, 1995).
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