Last week I noted the slowing employment growth of midsized businesses and the consequent dependence of our economic recovery on the very largest businesses.

Establishments with 1,000 or more employees accounted for fully 44 percent of net employment growth between the second quarter of 2012 and the second quarter of 2013 (the latest period for which these data are available). This trend is alarming for Maine because (as of the third quarter of 2013) we have only 28 employers in this size category.

We often say with pride that Maine is a state of small businesses. This image flatters our sense of gritty independence and our determined “make do” attitude. It also masks the precarious nature of our economy. We’re like the tough guy who soldiers on through the pain in his chest and his shortness of breath rather than confront the underlying fear and see a physician. This image reinforces for me the utility of the health care analogy for our economic development-business assistance strategy.

Rather than focus on sectors we ought to focus on size. When families bring children into the world, they check with a pediatrician on a regular basis to see how the newcomer is doing on a variety of metrics of growth and function. Much of health care throughout the course of life is based on the accumulated knowledge of what is “normal” for people of a given age, gender, height, weight, etc. We could learn much by applying the same model to business enterprises of given ages and employment sizes.

Businesses in the very small category (fewer than 10 employees), for example, might be thought of as babies born prematurely – their impact depends less on how many are born than on how many survive. There were nearly as many jobs created by new and expanding small businesses in 2009 (in the depths of the Great Recession) as there were in 2013. The difference in this business category’s contribution to the overall economy was that its survival rate was greater in 2013.

Moderate-sized businesses (10 to 100 employees) had a similar pattern of job creation through births (nearly as much in 2008 as in 2009), but a much greater contribution through survival and expansion. This same pattern of declining rates of closure and higher rates of employment expansion hold true across the employee size scale. In short, there appears to be a threshold in the 50-to-250-employee size category where survival seems less in question and opportunities for adding employees to be greater.


The questions for business development strategy, therefore, seem to be, first, “How do we get firms over the 50-employee threshold?” and, second, “How do we encourage those above that level to hire more workers?”

I certainly don’t have the answers to these questions, but I do believe that our policy makers would do well to focus on such dynamics of growth across all sectors of the economy instead of attempting to identify which sectors deserve special state subsidies or tax breaks or other support because they are the “sure things” of the future.

Such sectoral targeting, like any economic forecasting, is difficult at best and always subject to partisan redirection as administrations change. Focusing on helping businesses of all types navigate the pangs of growth seems a steadier and, over the long run, more productive way of achieving the ultimate economic development goal of job growth.

Charles Lawton is chief economist for Planning Decisions Inc. He can be contacted at:

[email protected]

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