Middle Market Firms: America's Job Creators

A report Dun & Bradstreet and American Express released in April reveals striking, thought-provoking facts about how the health of the middle market is central to the health of the overall U.S. economy. Though midmarket firms make considerably less than enterprise-level corporations, their economic impact is exponentially higher. Overall, the sector contributes nearly $6.2 trillion to the national economy each year.

The middle market is America's primary job creator, contributing about 50 million opportunities to the market.

This is primarily because of workforce impact; the middle market is effectively America's job-creation engine, keeping a significant portion of the U.S. employed.

The Midmarket's Effect on the American Workforce

According to the report, although midmarket firms represent just 0.72 percent of all U.S. companies, they deliver 21 percent of business revenue and employ 28 percent of the private workforce. Using an average firm size of 368 as a benchmark, they provide 50 million jobs across the country. Further, of the nearly 2.8 million jobs added by commercially active firms since 2008, 92 percent have come from midmarket companies. Unlike other segments, the middle market is rich in manufacturing and wholesale trade, and it's also strong in the growing niches of financial, education and health services. This gives the midmarket workforce significant job diversity. Additionally, 98 percent of midsized companies are privately owned, while just 43 percent of firms with $1 billion or more in revenues can say the same. Because private companies do not need to focus on maximizing shareholder profit, they have more freedom when expanding their own workforce.

The lack of a midmarket presence also holds back regional economic potential. The South Florida Business Journal points out in the report that the share of midsized businesses in Florida is half the national average — 0.36 percent compared to 0.72 percent. There are only two other states, Louisiana and Colorado, where midsized firms make up less than 0.50 percent of the overall business mix. Julie Weeks, an American Express research adviser who oversaw the study, said, "If you have more middle market businesses in your state's economy, you are going to have more job growth." Inversely, those regions without a midmarket presence will see a stagnant job market, especially because midsize firms have contributed most of the economy's new jobs since 2008.

For Midmarket Executives, What Do These Figures Mean?

Weeks noted one particular aspect of midsized firms that would account for their outsized ability to grow jobs: When a midmarket firm is doing well, it is capable of hiring 10, 20 or perhaps even 100 people. On the contrary, smaller firms generally only hire one or two people at a time, and the largest firms are generally slow to hire because of time-consuming internal bottlenecks, outsourcing and automation.

Furthermore, when the overall economy or an individual industry is flat or declining, midsized firms are the most likely to hold onto personnel. Smaller firms rarely have the financial ability to endure slow periods without downsizing, while larger companies can lay off workers and spread the workload across other employees, contractors or automated solutions.

Midsized firms give employees a stable organizational structure, a greater chance to handle a range of responsibilities and better access to upper management. With these advantages, such companies have an opportunity to recruit strong talent across all experience levels. In places like Florida, where the middle market is lacking, companies can target universities and offer relocation assistance, boosting their attractiveness. They should also target experienced employees at larger companies, who might be responsive to competitive benefits, an advantageous organizational structure for motivated people, more transparency and better camaraderie. The fact that a midsized firm is privately owned is also intriguing to employees who have endured the quarter-by-quarter uncertainty and adjustments that take place at many larger, shareholder-dependent, publicly owned companies.

The bottom line is this: The middle market is the central cog in the nation's job-growth machine, and midsized firms have a real opportunity to sell smart people on the advantages of working for them. These companies can win by offering a satisfying, fulfilling career.

How does your midmarket firm approach growth spurts? Do you hire new employees one at a time, or 10 to 20 or more at a time? Tell us by commenting below.

Rob Carey is an NCMM contributor and a features writer who has focused on the business-to-business niche since 1992. He spent his first 15 years at Nielsen Business Media, rising from editorial intern to editorial director. Since then, he has been the principal of New York-based Meetings & Hospitality Insight, working with large hospitality brands in addition to various media outlets. Circle him on Google+.


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