There are lots of reasons to love small businesses. They're more likely to have happy employees. They create tons of new jobs (though worryingly there's a hiring slump currently). And, according to a new analysis by PayScale, they even pay their employees better.

While glitzy behemoths like Facebook, McKinsey, and Google often top lists of the best employers, PayScale's quarterly analysis of full-time salary trends suggests that at the present time, small businesses are beating the big boys in one key area--wage growth.

"While the headlines oftentimes go to the large-sized companies, The PayScale Index for the second consecutive quarter showed wage growth for small companies outpacing medium and large companies," Katie Bardaro, lead economist, PayScale, explained on the company's blog. For the purposes of the index, small companies are defined as those with less than 100 employees.

So how badly did the little guys beat out larger firms? Wages for small companies rose 2.2% in the fourth quarter of 2012, but just 1% for medium companies and a measly 0.9% for large ones.

"This strong quarterly growth pushed small companies to almost 5 percent year-over-year wage growth, compared to only 2.7 percent for medium companies and 3.3 percent for large companies," Bardaro said.

So what's behind the comparatively impressive wage growth at small firms?

"Often in the hands of entrepreneurs or families, small businesses with up to 99 employees are typically more flexible when economic shifts occur but can lack the deep pockets to survive a major decline in the economy," notes the Index besides a graph showing a sharp decline in wages during the worst years of the economic crisis and a steep increase over the last three quarters of last year.

The chart suggests that though small companies may have been hit hard by the recession, they may have the agility to bounce back more quickly now that the worst is passed. The report names other winning sectors for wage growth, including (somewhat surprisingly) media, construction and entertainment jobs, and (less surprisingly) tech and the energy industry.

How do you explain the comparatively strong wage growth at small businesses, and are you surprised by it?


Published on: Jan 14, 2013
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