Monday, July 30, 2012

Companies Are Getting Smaller

Frequently reading about layoffs occurring at [insert large company name here]? Though these types of events happen more often during recessions, they also occur rather frequently during all parts of the business cycle. This has always been a trait of capitalism; small, innovative, growing firms take business away from large, bureaucratic behemoths. But there's more to it lately.

Since the year 2000, the fraction of the American workforce working at large firms has fallen by 13%. Over the same period, the fraction of American employees working at small firms has increased by 8%.

According to some neat charts put together by Evan Soltas, this process only accelerated during the recent recession, with large firms shedding far more workers than small, and small firms adding more workers than large as the economy has recovered.

Evan's conclusions are interesting, as he surmises that technological changes may be implying increasing returns to "low fixed-costs and other traits that characterize small firms". You can read the entire article here.

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