Bigger is better – small businesses once employed over half of private sector workers but no longer

Ten years ago, small businesses, those with fewer than 20 employees, employed over half of private sector workers in Queensland, but that is no longer the case. This was revealed in an excellent note, Small Business in Queensland, published yesterday by the Queensland Government Statistician’s Office, part of the Queensland Treasury:

“While small business makes a significant contribution to total employment in Queensland, its share has fallen from 55.9% in June 2007 to 44.2% in 2016.”

The trend decline occurred across Australia, although the fall was greater in Queensland than the rest of Australia, on average.

While small business employment declined, employment in medium-sized businesses (20-199 employees) increased. The Government Statistician’s Office reports:

“Between June 2007 and June 2016, the number of persons employed in a small business in Queensland decreased by 166,000 (down 15.4%)…Conversely, the number of persons employed in a medium or large business increased by 128,000 (38.0%) and 172,000 (33.5%) respectively.”

Incidentally, medium-sized businesses and large businesses (200+ employees) make up only 2.6 percent of total businesses, but account for 56% of employees (see chart below).

Why have small businesses declined in relative importance? Many factors have probably contributed to the downward trend, including, among others:

  • Consumer preferences, with consumers preferring to shop at bigger stores with more variety and lower prices (as the bigger stores benefit from economies of scale);
  • Information and communications technology improvements which have made it easier for successful businesses to extend their business models into new regions;
  • Government regulations, particularly in workplace relations, which impose costs that massively eat into the margins of small businesses and can more readily be absorbed by larger businesses; and
  • Deregulation (e.g. of retail trading hours), which has gradually been eliminating many of the small corner stores that were once prevalent in Australia.

Of course, technology is now allowing many people to set up micro-businesses, such as consultancies or Uber driving businesses, so there may be a reversal in the longer-term trend to some extent. But the longer-term trend away from traditional small businesses, such as a corner store or newsagent employing half a dozen people, appears unstoppable.

Qld_businesses_2016

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2 Responses to Bigger is better – small businesses once employed over half of private sector workers but no longer

  1. Glen says:

    Sadly Gene as someone who travels throughout Northern Australia I have seen many of these small businesses close in regional cities and rural towns, small engineering firms who made farm machinery and custome irrigation setups, small meat works and butchers etc, those sorts of businesses. Whilst a change in purchasing habits has had some effect the largest by far was the loss of staff to the mining boom where local businesses could not compete with wages and subsequently closed their doors, these types of businesses will most likely never return.

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