Wages at Small Businesses Inching Back Up

Dec. 7, 2005--When it comes to hiring, small businesses may be stressing quality over quantity, according to a nationwide survey of payroll data released Tuesday.

With fewer workers being hired at small businesses in recent months, wages are inching back up from sharp declines earlier this year, according to SurePayroll, a national research firm that tracks small-business employment.

SurePayroll's monthly hiring index, based on paychecks issued to contractors and employees at more than 15,000 small businesses across the country, slid by 0.04% from October, to 10,466. November was the third consecutive month of declines following a run on hiring this summer, the survey showed.

At the same time, wages have grown in five of the last six months, rising 0.3% last month to an average annualized rate of $28,888. Prior to June 2005, wages had dropped for 15 straight months, after ballooning in 2000.

The results, said SurePayroll president Michael Alter, show that the slower pace of new hires is putting upward pressure on salaries. "What we're seeing is caution from smaller businesses," Alter said.

Bigger average paychecks, he said, could mean salary dollars are shifting to high-productivity workers, as small businesses try to do more with less.

"Small businesses are risk-takers by their nature, but if orders are up, they'll get existing workers to work harder and add employees after the orders are filled," he said, adding that most big companies would do the opposite -- that is, respond to more orders by hiring more workers. "Small business can't afford that risk," he said.

Market analysts pay close attention to wages, which are tightly linked to consumer spending trends. Consumer spending accounts for about two-thirds of economic growth.

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