“The substantial contribution of smaller
businesses to BC’s export mix suggests
there is scope to further increase the
involvement of locally based SMEs in
international markets.”
British Columbia is home to roughly 393,000 businesses.5 As our politicians never tire of
reminding us, 98% of these are small; by the BC government’s definition, this means they have
fewer than 50 employees (more than half have fewer than five). In fact, some 217,000 businesses
in BC consist of self-employed individuals with no paid staff at all. In the past decade, the
number of businesses in BC with paid employees increased only one-third as fast as the number
with none. This suggests that a fair amount of private sector “job creation” in this province
actually takes the form of people choosing, or being forced, to become self-employed—a group
who, on average, have lower earnings than paid workers holding full-time jobs.
Contrary to what many people believe, an economy heavily populated by the self-employed
and by micro-businesses with two or three employees is apt to have both lots of low-wage jobs
and relatively low average employment earnings. This describes some important structural
characteristics of the BC labour market.
Clearing the Path to Success
the problem solvers™
As of 2012, only 6,900 enterprises in the
province employed more than 50 people,
and of these, most were medium-sized (50
to 499 employees). I estimate that only 700
to 800 firms in BC have 500+ workers. To
build a highly productive private sector
economy, the most pressing challenge in BC
is not to engineer more start-ups and foster
more micro-businesses—these are areas
where we already perform well. Instead, it is
to develop more large-scale enterprises, and
to create an environment that supports
growth-oriented medium-sized companies
with strong roots in BC.
But why should we want more of our local
businesses to get bigger? There are several
reasons.
First, larger companies generally pay their
employees more. In Canada, average weekly
earnings in firms with 500 or more employees
are 22% higher than in those with 20 to 49
workers. Non-wage benefits also tend to be
more generous in larger companies. In BC, the
average full-time equivalent small business
employee pulled down an annual salary of
$39,210 in 2012, compared to $48,318 for
employees at firms with 50+ staff. Moreover,
as the BC government’s most recent Small
Business Profile report observed, “the difference between wages of employees of small
and large businesses widened [between 2007
and 2012]... as average earnings of small
business employees increased at less than half
the rate than those of their large business
counterparts.”6 Policy-makers keen to see
higher pay for workers and more “familysupporting” jobs should be thinking about
ways to bolster BC’s attractiveness to large
companies and to the sub-set of innovative
SMEs that have ambitions to grow.
Second, and closely related to the point
above, larger firms are more productive,
meaning that they generate more “valueadded” per employee or per dollar of capital
invested. Research from the OECD, Statistics
Canada, and other agencies reveals that, on
a per-worker basis, value-added typically
areas of practice
alternative dispute resolution
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20
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wills and estates
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CPABC in Focus • Feb/Mar 2014
5
Singleton Urquhart llp
1200 – 925 West Georgia Street
Vancouver, BC V6C 3L2
T 604 682 7474 | F 604 682 1283
Toll Free 1 877 682 4404
www.singleton.com | [email protected]
For details, see the BC Government’s Small
Business Profile 2013 publication.
6
Ibid, page 21.