Growth Stunt

Rising costs have put a damper on small-business hiring.
Magazine Contributor
2 min read

This story appears in the June 2005 issue of Entrepreneur. Subscribe »

"The economy certainly is not overheating in the small-business world," says Michael Alter, president of payroll service firm SurePayroll. The Skokie, Illinois, company's latest quarterly report on small-business payrolls, released in April, suggests Alter may be understating the hiring chill that's currently gripping entrepreneurs.

Year-to-date growth in the SurePayroll Hiring Index, which measures changes in small-business size, is less than one-half of one-tenth of a percentage point. Alter says the rising costs of capital and fuel have made small employers cautious. Interest rates are double what they were one year ago, he notes, and fuel costs have skyrocketed, while business owners' ability to raise prices is limited. "Your prices are fixed, your costs are all going up--it's hard to hire people and grow," he says.

Some key findings of the SurePayroll Pay Index, which measures changes in average paycheck size, include falling salaries and a sharp increase in the use of contract employees. Year to date, independent contractor use has grown by 2.2 percent, indicating small businesses are becoming less reliant on full-time employees. Wages, on the other hand, have fallen an average of 1 percent nationwide. The sharpest declines were in the West, while wages rose in the Midwest and the South.

Falling wages could be bad news for the economy in the long term. "If you continue a 1 percent decline, that's a big annual change," Alter notes. "Consumer confidence should decline if that continues."

But Alter doesn't expect a crisis soon. "My bet is we're going to be on this plateau for a few quarters," he says. "I don't think there's anything on the horizon sending us one way or another."

More from Entrepreneur

One-on-one online sessions with our experts can help you start a business, grow your business, build your brand, fundraise and more.
Book Your Session

In as little as seven months, the Entrepreneur Authors program will turn your ideas and expertise into a professionally presented book.
Apply Now

Are paying too much for business insurance? Do you have critical gaps in your coverage? Trust Entrepreneur to help you find out.
Get Your Quote Now

Latest on Entrepreneur

My Queue

There are no Videos in your queue.

Click on the Add to next to any video to save to your queue.

There are no Articles in your queue.

Click on the Add to next to any article to save to your queue.

There are no Podcasts in your queue.

Click on the Add to next to any podcast episode to save to your queue.

You're not following any authors.

Click the Follow button on any author page to keep up with the latest content from your favorite authors.