Small Firms Are Big in Job Creation

When Frank Mendicina bought three branch offices of an ailing copy machine distributor in 1981, he had 25 employees, tops, “and that’s counting me and my wife, Lucy,” he said.

Today, Mendicina’s Select Copy Systems employs about 120. He has hired 35 people in the last 12 months and expects to add 10 or 12 more before the end of the year. sales should run at least $8 million, compared to $2 million five years ago. And Mendicina has just consolidated his customer service and repair operations at a new headquarters in Irwindale.

“Everybody talks about service,” Mendicina said, “but it takes a combination of good service, personnel and products. I have been able to hire young college graduates, bright young people coming out of school, and I’ve been able to keep them.”

The economic role of small but growing businesses like Mendicina’s--and some even smaller--is often overlooked, economists and entrepreneurs say. While the big guys in the Fortune 500 get most of the attention, it is the mom-and-pop operations that are often more important when it comes to creating new jobs in the economy, especially for first-time job applicants and low-skilled workers. (The definition of a small business varies widely, from one with fewer than 20 workers to one as big as a 500-employee firm.)

“I think small business has been grossly overlooked, but I think it’s now beginning to be acknowledged as the engine that drives the economy,” said Oscar Wright, the state’s official small business advocate in Sacramento. “Perhaps the time has come to focus on those small businesses that are really creating the jobs.”

Small companies employ more than half of the nation’s work force and provide two out of every three “first jobs.”

Last year, industries dominated by small businesses had a 5.1% growth in jobs while industries dominated by large companies had only a 0.7% employment increase. During the 1981-82 recession, small business created 2.65 million jobs while large businesses cut 1.7 million jobs, according to the U.S. Small Business Administration.

Jack Kyser, economist with the Los Angeles Area Chamber of Commerce, said that big business creates most new jobs during recovery cycles as they add shifts and personnel that were cut in the previous down cycle. “But during normal times and during a business downturn, the small business creates most of the new jobs,” he said.

A study by Wells Fargo Bank found that industries dominated by small firms accounted for more than 85% of the job growth in California last year, senior economist Gary Schlossberg said. Those industries included retail trade, construction and a variety of service businesses.

One reason that small business creates so many jobs is that small companies tend to cluster in labor-intensive industries that are growing quickly, he said.

“What that says to the job seeker is not so much small versus large,” Schlossberg said. “For the job seeker, the chance of finding work is that much better in a variety of service and retail areas, and that’s where small businesses dominate.”

In Los Angeles County, nearly 95% of the firms have fewer than 50 employees and account for about 30% of the total employment in the county, Kyser said, suggesting that a job search might best be started at the neighborhood level, particularly if the job seeker has few skills or if it is his or her first job.

“It’s sort of awe-inspiring to walk into the employment office of one of the downtown banks, but if it’s a small print shop or a small retailer, it’s more familiar,” he said.

“Anybody looking for a job should network, network, network,” Kyser said. “Look close to home. The building may look like nothing, but inside may be a thriving, say, management consulting firm.”

A computerized survey of small-business owners attending the recent White House Conference on Small Business found that most expect sales and employment to increase in 1987, Dun & Bradstreet Corp. said.

Nearly nine out of 10 delegates surveyed looked for higher sales next year, and two out of three said they expected to hire more people. Nearly 300 of the 1,800 or so conference delegates participated in the survey.