6/30/98

Contacts:
Terry Besser, Sociology, (515) 294-6508
Brian Meyer, Agriculture Information, (515) 294-0706

ISU STUDY: SMALLEST FIRMS ARE KEY TO JOB QUALITY IN RURAL IOWA

AMES -- The lifeblood of many rural communities is the businesses that employ just a few workers. To improve job quality in Iowa's small towns, more attention needs to be paid to these tiny companies, according to Iowa State University sociologists.

"Half of Iowa's small-town businesses employ less than five workers," said Terry Besser, an ISU sociologist. "Two out of three employees work in businesses with fewer than 51 employees."

Besser conducted a survey of 820 employers in 30 Iowa towns with populations of 500 to 10,000. She has been sharing the results with small-town groups as part of "Quality Jobs for Quality Communities," an ISU Extension program that provides information and support to help communities develop strategies that result in high-quality jobs.

Sixty percent of the firms surveyed were retail and service companies, which employed the most workers. Ninety-six percent were locally owned. The largest employers &emdash; those that employed more than 50 workers &emdash; made up only 3 percent of all companies, but accounted for 33 percent of the employees.

"There is a certain cost-effective rationale to economic development efforts that pay more attention to businesses with the largest number of employees. However, the survey shows there is evidence for a more balanced strategy," Besser said.

While a labor shortage and low wages plague rural communities, another problem is low or no benefits for workers. "Fifty-eight percent of Iowa's small-town businesses offer health benefits to full-time workers," she said. "Nationally, the percentage for firms of similar size is 66 percent. Also, 34 percent of small-town firms offer retirement benefits. Nationally, 42 percent of small firms do." For part-time employees, only 10 percent of small-town firms provide health benefits, and 9 percent offer retirement benefits.

"The smaller the business, the less likely that benefits are offered," Besser said. "Retail and service firms are below the average of small-town businesses in all benefit offerings."

In spite of lower benefits and fewer full-time jobs, small-town firms do not suffer great turnover. More than half reported no turnover in the year prior to the survey. "Apparently, employees consider factors such as interest in their work, a sociable atmosphere, length of commute and flexibility of schedule in their decisions to stay," Besser said.

Since most of the smallest employers are retail and service firms, current strategies to improve labor productivity and satisfaction may not apply. Many of these strategies were developed for other businesses, like manufacturing.

"New, more creative strategies are needed," Besser said. Those may include new networking strategies among businesses or public/private partnerships that address employee training, childcare, transportation and benefits. Companies with high growth and low turnover could be identified as models for other businesses.

This spring ISU held a series of forums on job quality issues. This summer ISU will select three Iowa communities to participate in a pilot program on developing economic development strategies that take job quality into account. The Quality Jobs for Quality Communities program is funded by the Northwest Area Foundation.

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