While big corporations hire more workers, it is usually new businesses less than one year old that create more job opportunities. However, reports show the situation has changed and that job creation by start-ups is falling. An article published in the Washington Post last year cites a Kaufman Foundation study which reported that the average number of workers in start-ups has shown a downward trend since 1998 and that the rate at which they hired new workers has been falling since 1994. Today, many start-ups have only one or two full-time employees and use part-timers as needed, according to a Seattle Times report. According to data from the Bureau of Labor Statistics (BLS), new companies in Washington that are less than a year old would have employed five or more people a decade ago, but hire only about three workers at present.
Why New Businesses are Hiring Less Workers
- Increased automation is one of the reasons for less hiring at new businesses. For example, setting up an efficient document management system in a doctor’s office would have once needed personnel to keep track of patient data and other relevant information. Today, it’s all automated. Technological change has reduced the need for data entry workers in many offices.
- Customer self-service trends are another reason why businesses need fewer workers. Banks have ATMs to even dispense singles and small denomination notes, something that tellers once used to do. Self-service also means less staff in stores and restaurants – affordable prices, convenience and good quality products seem to attract customers more than personalized service.
- Increased cloud computing and business process outsourcing has opened a way for companies to grow without adding technical staff or IT professionals.
- According to a recent report, a rise in minimum wage ranges will slow down hiring. The report cites a new survey by staff firm Express Employment Professionals which found that companies will reduce hiring if the federal wage is raised to $10.10 per hour.
- Technology is changing the kind and the type of work done by humans. Even though human intervention is necessary for smooth completion of processes, technology has an important role in reducing the number of employees at work. For example, the Seattle Times report says a year-old software company focused on the health-care sector supplemented its three-member staff with cloud computing and contract workers.
Experts say that this cautious hiring approach might help business as it reduces their chances of hiring the wrong people. A cautious approach is also necessary when opting for business process outsourcing services – a business can succeed only by partnering with a reliable service provider that can provide efficient solutions at affordable costs.