According to the latest County Business Patterns (CBP) assembled by the Census Bureau for 2021, Indiana had nearly 2,755,000 jobs in 151,000 establishments with annual payrolls totaling $145 billion
This is only a partial tally of Hoosier economic activity. Excluded are data on self-employed individuals, employees of private households, railroad employees, agricultural production employees, and virtually all employees at every level of government.
Our 151,000 establishments are the places where people are paid for working. It excludes the sweet (unpaid) elderly gentleman who talks to you while you wait for his daughter to cut your hair in that one chair barber shop. Also excluded are the volunteers who assist the paid staff at the church recycle store.
Of those 151,000 establishments, 76,600 (51%) had fewer than five employees which accounted for fewer than 5% of the jobs and payroll in the state.
Some analysts might suggest these are inefficient small businesses which should be encouraged by their banks to get bigger. Further, local or state governments might be asked to provide favorable tax treatment to keep them alive in the face of competition from larger firms offering the same services at lower prices.
Let’s think about the local dry cleaner where you are taking your winter coat now that more temperate weather is here. First, it may be part of a chain of such stores where garments are taken and retrieved. The actual cleaning may be done at a centralized, larger facility.
Second, consumers may prefer taking and picking up their garments at a shop with a single purpose rather than combining infrequent trips with their routine grocery shopping.
There are big boxes that offer dry cleaning along with shoe repair, banking, optometry, tax preparation, (and perhaps soon-to-be-announced) family counseling, veterinary and mortuary services. Look for the ads: Drop off Dad as you stock up for that weekend barbeque.
In similar fashion, 71% of Hoosier not-for-profit (NFP) establishments had fewer than 10 paid jobs in 2021. They accounted for just 10% of NFP jobs and 7% of NFP payrolls.
This makes sense since a small unit is often close to the people served, does not require an HR director, and can rely on outside firms for specialized services.
By contrast, NFPs with 250 or more jobs had 42.2% of the annual NFP payroll and 48.4% of the jobs operating in 48% of the establishments. It takes lots of workers to stuff those envelopes and many creative minds to plead incessantly on different platforms for funding.
A business or NFP activity of small size is not inherently inefficient. Nor is a firm of great magnitude inherently wasteful. In the past, technical changes encouraged greater size. Now, we seem to be in an era when technology enables both smaller units for the provision of services and larger units for production.