StatCan Debunks Small-Business Mythology
Canadian economic commentators often worship small business as the supposed source of economic dynamism and growth. This cult of small business has greatly influenced public policy, with federal and provincial governments giving huge tax preferences to small corporations.
But new Statistics Canada research finds: â€œThe gap between the levels of labour productivity in Canada and the United States is due primarily to the larger share of employment in small firms in Canada and their comparatively lower labour productivity vis-a-vis large firms.â€
Of course, productivity is not an end unto itself. Gains in labour productivity are not always shared with workers. In recent decades, median employment income has lagged far behind productivity growth.
But workers are better able to negotiate a share of productivity gains with large firms because union organizing is more practical in large workplaces. In Canada, union coverage is 55 per cent in establishments with more than 500 employees, but only 15 per cent in establishments with fewer than 20 employees.
Reflecting this combination of higher productivity and more collective bargaining, average weekly earnings exceed $1,000 at establishments with more than 500 employees. By contrast, this average is as low as $736 among establishments with between 5 and 19 employees.
Large employers are also far more likely to provide benefits, especially if they are unionized. Bigger is better for workers.