Key Small Business Statistics - July 2002

How many jobs do small businesses create?

Over the last seven years, data have become available on what size of firms create net jobs in the economy. The data are derived from Statistics Canada's Survey of Employment, Payrolls and Hours (SEPH), and have been regularly published in the Small Business Quarterly. The SEPH data exclude job creation through self-employment, unless the person is on the payroll of his/her enterprise. Other limitations also apply (see How many People work for Small Businesses?).

Table 5 and Figure 4 display the relative contribution to job creation in the private sector economy covered by SEPH, by "small", "medium", and "large" businesses over the years 1994 to 2000. During the 1994 to 2000 period, data availability limits the definition of "small" businesses to firms with fewer than 50 employees, "medium" to more than 50 but fewer than 300 employees and "large" to more than 300 employees. The relative contribution by each size class has varied considerably, and throughout the seven-years period each size class has played a major role in creating jobs in Canada at a certain time period. In 1994 and 1995, large businesses were shedding jobs and most of the job creation was found in small enterprises. In 1996 and 1997, medium-sized enterprises took over the lion's share of net job creation. In the last three years of the 1994 to 2000 period, small businesses created less than a quarter of net new jobs while large enterprises were responsible for more than half of the total.

Table 5: Percent Contribution to Net Private Sector Paid Employment Change by Size of Business Enterprise, 1994–2000, annual averages¹

Year	% Contribution to Private Sector Employment Change
	Small Enterprises (Up to 49 Employees)	Medium Enterprises (50 to 299 Employees)	Large Enterprises (300 Employees or more)
Source: Statistics Canada, Survey of Employment, Payrolls and Hours (SEPH); special tabulation for Industry Canada; and calculations by Industry Canada. The underlying data are regularly published in the Small Business Quarterly. Note 1: SEPH data exclude self-employed workers who are not on a payroll, and employees in the following industries: agriculture, fishing and trapping, private household services, religious organizations and military personnel of defence services. Data underlying this table exclude employment in Public Administration, postal services, public transit, educational services and institutional and other government-funded health care services, but include employment in private sector health practices and beer and liquor stores.
1994	116%	22%	-38%
1995	64%	43%	-7%
1996	-30%	113%	17%
1997	3%	65%	32%
1998	23%	24%	53%
1999	12%	33%	55%
2000	16%	22%	61%

Figure 4: Percent Contribution to Net Private Sector Paid Employment Change by Size of Business Enterprise, 1994-2000

Source: Table 5

A significant limitation of these data is that they cover a generally expansionary period, with only a mild downturn in 1995-1996. In a more severe downturn or a recession, the percentage contributions to job creation (or loss) by smaller business may be quite different.

In October 2001, Statistics Canada started to publish the employment data from the Survey of Employment, Payrolls and Hours (SEPH) in more detailed breakdown by size of business enterprise. Data on this basis are available only from the first quarter of 2000 onwards and for the four quarters of 2000 the data based on the Standard Industrial Classification (SIC-1980) were backcasted to the new North American Industrial Classification System (NAICS). Net changes in employment in the quarters of 2001 over the corresponding quarters of 2000 should therefore be treated with some caution. According to these new data, private sector payroll jobs continued to increase over the 4 quarters of 2001 but the rate of increase slowed over the course of the year from almost 400,000 jobs created in the first quarter to less than a quarter of that amount in the fourth quarter (see Table 6). The major contributor to job creation also shifted from the large and medium sized firms to firms with fewer than 100 employees. In fact, according to these data, the contribution to job creation by firms with fewer than 100 employees reached a whopping 159% and compensated for big job loss by medium and large businesses in the last quarter of 2001.

Table 6: Year over Year Net Private Sector Paid Employment Change and Percent Contribution by Size of Business Enterprise, 2001 Q1–Q4^1,2,3

Year and Quarter	Total Net Change	Net Private Sector Paid Employment Change by Size of Business
		0–4	5–19	20–49	50–99	Small (<100)	100–299	300–499	Medium (100–499)	Large (500+)
Source: Statistics Canada, Survey of Employment, Payrolls and Hours (SEPH), January 2002; calculations by Industry Canada. Note 1: SEPH data exclude self-employed workers who are not on a payroll, and employees in the following industries: agriculture, fishing and trapping, private household services, religious organizations and military personnel of defence services. The data breaking down employment by size of firm also exclude unclassified industries. Note 2: Statistics Canada cautions that data by size produced for quarters prior to year 2001 were estimated from the previous data based on the SIC-1980 and then backcasted on the new NAICS classification. Especially in the smallest size categories, more volatility in the data should be expected. Note 3: Data shown in this table exclude employment in Public Administration, postal services, public transit, educational services and institutional and other government-funded health care services, but include employment in private sector health practices and beer and liquor stores. A technical note on the separation of public and private sector employment is available.
2001 Q1	403 934	44 092	6 428	39 708	28 291	118 520	56 422	20 818	77 241	208 180
Q2	289 725	7 815	30 157	43 897	42 064	123 934	43 089	9 153	52 243	113 553
Q3	194 830	64 440	11 522	39 862	38 427	154 250	14 101	-3 195	10 906	29 688
Q4	90 913	44 896	42 191	41 685	15 731	144 503	-18 982	-30 022	-49 005	-4 589
% Contribution to Private Sector Employment Change by Size of Business
2001 Q1	100%	10.9%	1.6%	9.8%	7.0%	29.3%	14.0%	5.2%	19.1%	51.5%
Q2	100%	2.7%	10.4%	15.2%	14.5%	42.8%	14.9%	3.2%	18.0%	39.2%
Q3	100%	33.1%	5.9%	20.5%	19.7%	79.2%	7.2%	-1.6%	5.6%>	15.2%
Q4	100%	49.4%	46.4%	45.9%	17.3%	158.9%	-20.9%	-33.0%	-53.9%	-5.0%