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San Diego Small Business Wages Lag Behind

Higher pay at bigger firms make it harder for small business to compete

San Diego Small Business Wages Lag Behind

GUESTS:

Marquise Jackson, regional director, San Diego & Imperial Small Business Development Center

Mike Sovacool, lead economic development specialist, U.S. Small Business Administration

Transcript

Small business is the engine that fuels the San Diego economy. But the San Diego Regional Economic Development Corporation recently pointed to the large number of small businesses in the region as one of three areas of concern that could lead to even greater income inequality.

The EDC found 98 percent of companies in San Diego have fewer than 100 employees and they pay up to 20 percent lower wages than the regional average. The gap is even wider between small business and those with more than 1,000 workers. Bigger firms pay 45 percent more than the average.

“This disparity makes small businesses less competitive in attracting and retaining talent,” the EDC said in a report last month.

RELATED: San Diego Businesses Point To Looming Economic ‘Pain Points’

Because 59 percent of San Diegans work in those smaller firms, compared to 49 percent nationwide, the disparity also depresses wages.

It’s natural that big corporations are able to pay less for things like insurance, rent and raw materials when bought in bulk, according to Mike Sovacool, lead economic development specialist at the San Diego office of the U.S. Small Business Administration. Small businesses have to increase their revenue before they can pay workers more, he said.

“I’ll be the first to tell you, the reduction in taxes and regulations all helps,” Sovacool said. “One guy was able to buy another $100,000 backloader and hire an additional project manager.”

But a recent survey showed only about 10 percent of small business owners planned to give workers a raise after last year’s tax cuts.

Businesses looking for lower-skilled workers may not need to boost wages in order to attract talent, but high-tech firms do, said Marquise Jackson, regional director of the San Diego & Imperial Small Business Development Center. Without more cash-on-hand, those innovation-based firms may offer employees equity in the company, something larger companies are more hesitant to do, he said.

“Small business owners have to find a craftier way to compensate their employees,” Jackson said.

As part of our weeklong coverage of the threats to San Diego's economy, Jackson and Sovacool join KPBS Midday Edition on Tuesday with more on how small businesses can compete and what role government can play in increasing overall wages.

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