By Frank Corder
A report from the Mississippi State University Extension published last week takes a look at what types of businesses, in terms of age and size, the state should seek to attract and retain in hopes of that business contributing to Mississippi’s labor market.
The report, using data from the Census Bureau’s Business Dynamics Statistics, analyzes the debate within economic development circles in regard to courting new large firms into the region or assisting the survival and growth of existing small firms. It delves into the economic contributions of different types of establishments in the labor market, identifying the types of businesses that should get the most attention.
According to the MSU report titled “Business Employment by Age and Size of Firms in Mississippi,” older businesses are Mississippi’s main source of employment. Businesses older than five years supported 80% of jobs in 2020. Those businesses with an establishment age between 11 and 25 years accounted for 35% of businesses supporting 40% of jobs in 2020, while businesses older than 25 years represented 18% of businesses supporting one out of four jobs.
Startup businesses, or those establishments under the age of one, supported just 3% of jobs, the report stated. However, those startups generated 28% of new jobs in the past 12 months. This fact, the report notes, indicates that the entry of new businesses is essential in creating new employment opportunities.
As for hiring per year, the report stated that, on average, a startup business younger than a year hired eight employees while businesses older than 25 years employed 25 workers per establishment and created less than two new jobs on average.
Using the Census Bureau data, the MSU report notes that the vast majority of businesses – over 70% – were small establishments that hired less than 10 employees but accounted for 27% of the new jobs in the last 12 months. But small businesses only supported 15% of total jobs in Mississippi.
Businesses with between 100 and 499 employees make up 23% of the state’s workforce, and those establishments employing over 500 employees account for 20%.
“Of the 54,697 establishments actively operating in Mississippi in 2020, less than 1% were establishments that hired more than 500 workers. However, these establishments not only supported nearly 20,000 jobs (20% of total jobs) but also newly hired 10,000 jobs (11% of new jobs) within that year, indicating their importance in the Mississippi economy,” the report outlines. “Similarly, establishments with more than 100 employees supported 43% of jobs even though they represented only 2.3% of total establishments. These statistics indicate that those larger establishments are the main source of jobs in Mississippi, and are an essential part of the economy.”
The report goes on to compare Mississippi’s business market with the national average “to help understand Mississippi’s businesses in the macroeconomic context.” It states:
Business establishments aged 11 to 25 years are the largest group in both Mississippi and the U.S., and it was four percentage points higher in Mississippi in 2020. However, the share of establishments younger than six years is slightly lower in Mississippi than in the U.S. Establishments starting their business in the last 12 months were almost the same portion in Mississippi and the U.S. Sixty-six percent of Mississippi and U.S. jobs were supported by establishments older than 10 years. Mississippi and the U.S. present slightly different shares by the groups, but overall, they have similar patterns in age groups.
MSU’s report also notes that 58% of businesses in urban areas are 11 years or older while 50% of businesses in rural areas are of similar age. A slightly higher percentage of younger businesses – those under 5 years – are concentrated in rural areas (33%) compared to urban areas (27%).
The report concludes by stating that larger and more mature business are the major sources of jobs while smaller and younger establishments are major job creators. Thus, “helping establishments survive is vital to maintain a resilient labor market and regional economy.”
“Simultaneously, encouraging entrepreneurship is important for Mississippi to bolster a vibrant economy and accelerate economic growth. In urban and rural settings, we found that old (11 years or older) and large (with 19 employees or more) establishments are likely to be clustered in urban areas, while young (10 years or younger) and small (with 19 employees or fewer) establishments are likely to be concentrated in rural areas,” the report states in summary. “Older or larger establishments benefit residents in urban areas by providing stable job opportunities, and younger or smaller establishments benefit rural areas by creating new jobs. Therefore, urban and rural communities may need different strategies for helping businesses foster a vibrant economy and maintain a resilient labor market. Economic development policy helps existing urban businesses survive and encourages rural entrepreneurs to establish businesses.”
By Frank Corder