Small business owners are finding it increasingly difficult to match the wages offered by their larger competitors, according to new research, which could make it harder to find and retain talent on Main Street.
A new Kauffman Foundation study shows that small businesses have historically paid workers significantly less than large firms, with small firms closing the gap to its slimmest margin in 2001, when their employees earned on average 78 percent of the salaries paid to workers at large firms. But the gap has been growing steadily ever since, and by 2011, that figure dropped to 66 percent.
Over the same period, a similar trend was reported between young and old companies, as the percentage earned by employees of start-ups compared to those of established companies dipped from 85 percent to 70 percent.
That the gaps exist isn’t alarming, one expert explained, as small and young firms simply have smaller pools of capital from which to pay employees. But the rate at which their compensation levels are falling further behind has some worried that small businesses may lose more talented job applicants and employees to their larger, higher-paying counterparts.