Executive summary

• Just under 5 million people worked for small businesses in June 2018 which was equivalent to 44 per cent of all people employed in selected industries in the private sector.[1]
• Small businesses accounted for 34 per cent of Industry Value Added (IVA) and 29 per cent of all wages and salaries paid in selected industries of the private sector in 2017-18.
• IVA generated by the small business sector has increased from $335 billion in 2012-13 to $414 billion in 2017-18 which is equivalent to growth of $79 billion or 24 per cent.
• Employment growth in small businesses accounted for just under 60 per cent of total employment growth in the private sector between June 2013 and June 2018.
• The Australian Capital Territory, New South Wales, Victoria, Tasmania and Queensland all recorded strong growth in small business employment between June 2013 and June 2018. In contrast, Western Australia, the Northern Territory and South Australia all recorded contractions in small business employment.
• The private sector accounted for close to 97 per cent of all jobs filled nationally in the 12 months to September 2019.
• Small businesses accounted for 57 per cent of jobs growth (as distinct from growth in employed persons) between 2012-13 and 2016-17.[2]
• Total jobs in Australia increased by just under 1.3 million or 8 per cent in this period.
• There were around 5.6 million jobs held throughout the year in the small business sector in 2016-17 which represented just under 32 per cent of the 17.6 million jobs held in Australia in the combined private and public sectors.
• Growth in median employment per job between 2012–13 and 2016–17 was highest for firms employing fewer than five employees (at 2.9 per cent per annum). In contrast, median employment income for employees of large firms grew at an annual average of 2.1 per cent.

Introduction

This statistical snapshot provides the most recent information available on the contribution of the small business sector to the Australian economy using key economic indicators such as employment, wages and salaries, and Industry Value Added (IVA).[3]

What is a small business?

In this statistical snapshot we use the Australian Bureau of Statistics (ABS) definition of a small business which includes:

• non‑employing businesses (sole proprietorships and partnerships without employees)
• micro‑businesses (businesses employing between 1 and 4 people including non‑employing businesses)
• other small businesses (businesses that employ between 5 and 19 employees).

The ABS defines a medium-sized business as employing between 20 and 199 employees and large businesses as employing 200 or more employees.[4]

Industry scope of the ABS survey

Employment estimates by firm or business size are published by the ABS annually as part of the Australian Industry publication. The employment estimates are derived using a combination of data collected directly from the annual Economic Activity Survey (EAS) conducted by the ABS, and Business Activity Statement (BAS) data provided by businesses to the Australian Taxation Office (ATO).

The data includes business entities operating in the Australian economy apart from those that are classified as:

• General government. Only private sector businesses located in the industry divisions of Public administration and safety, Education and training, and Health care and social assistance are included. However, general government businesses classified as part of Water supply, sewerage and drainage services are included.
• Finance, Insurance and superannuation funds, and Auxiliary finance and insurance services within the private sector.
• Public administration, Defence, and Private households employing staff, and undifferentiated goods-producing and service-producing activities of households for their own use.

Key findings

Small business contribution to Australian private sector employment

There were just under 5 million people employed in small businesses at the end of June 2018, composed of just over 3 million employees in ‘micro firms’, and around 1.9 million employed in ‘other small businesses’. Chart 1 shows the steady increase in small business employment from 4.6 million in June 2013 to around 5 million in June 2018.

Chart 1: small business employment in Australia—2009 to 2018

Source: ABS, Australian Industry, cat. no. 8155.0

Table 1 shows changes of private sector employment in selected industries by firm size in Australia between June 2009 and June 2018.

Employment in the small business sector grew by 369,000 or 8.1 per cent in the period between June 2013 and June 2018. By comparison employment in medium-sized and larger private sector businesses grew by 87,000 (or 3.3 per cent) and 163,000 (or 4.8 per cent) respectively.

Growth in small business employment was much more pronounced in the 12 months to June 2018 compared with earlier years—up by 188,000 (or 4.0 per cent), which compares with growth of 68,000 (or 2.6 per cent) for medium-sized firms in this 12 month period and 80,000 (or 2.3 per cent) for large firms.

Employment in small businesses grew at almost twice the annual average growth rate of large businesses between June 2013 and June 2018 (1.6 per cent compared with 0.9 per cent).

Employment in small businesses accounted for just under 60 per cent of total employment growth in the private sector during this five year period and 56 per cent of employment growth in the 12 months to June 2018.

Table 1: change in employment in small, medium and large businesses—June 2009 to June 2018

	Business size
	Small	Medium	Large	Total
June 2009	4,556,000	2,333,000	2,920,000	9,809,000
June 2010	4,731,000	2,337,000	2,988,000	10,056,000
June 2011	4,781,000	2,558,000	3,197,000	10,535,000
June 2012	4,626,000	2,734,000	3,312,000	10,672,000
June 2013	4,571,000	2,607,000	3,381,000	10,558,000
June 2014	4,589,000	2,612,000	3,376,000	10,578,000
June 2015	4,725,000	2,495,000	3,422,000	10,642,000
June 2016	4,687,000	2,495,000	3,473,000	10,656,000
June 2017	4,752,000	2,626,000	3,464,000	10,841,000
June 2018	4,940,000	2,694,000	3,544,000	11,177,000
Change—June 2017 to June 2018	188,000	68,000	80,000	336,000
Change—June 2017 to June 2018 (per cent)	4.0	2.6	2.3	3.1
Share of growth—12 months to June 2018 (per cent)	56.0	20.2	23.8	100.0
Change—June 2013 to June 2018	369,000	87,000	163,000	619,000
Change—June 2013 to June 2018 (per cent)	8.1	3.3	4.8	5.9
Average annual growth—June 2013 to June 2018 (per cent)	1.6	0.7	0.9	1.1
Share of total growth—June 2013 to June 2018 (per cent)	59.6	14.1	26.3	100.0

Source: ABS, Australian Industry, cat. no. 8155.0, (Parliamentary Library calculations)

Chart 2 shows the small business share of total private sector employment has been relatively stable in the period between 2013 and 2018—ranging between 43 and 44 per cent. However, the small business share was as high as 46 per cent in 2009.

Chart 2: composition of private sector employment in Australia by firm size

Source: ABS, Australian Industry, cat. no. 8155.0, Table 5

Small business employment by state and territory

Tasmania had the largest small business share of total private sector employment in June 2018 (at 47.3 per cent), while Northern Territory had the smallest small business share (at 38.2 per cent) (see Chart 3).

Chart 3: small business share of total private sector employment—June 2018

Source: ABS, Australian Industry, cat. no. 8155.0, customised table

The Australian Capital Territory (ACT), New South Wales, Victoria, Tasmania and Queensland all recorded strong growth in small business employment between June 2013 and June 2018. In contrast, Western Australia, the Northern Territory and South Australia all recorded contractions in small business employment over the same five year period (see Table 2).

Table 2: small business employment by state and territory—June 2013 and June 2018

State/Territory	June 2013	June 2018	Change—June 2013 to June 2018
			‘000	%
New South Wales	1,519,000	1,721,000	202,000	13.3
Victoria	1,134,000	1,251,000	117,000	10.3
Queensland	893,000	973,000	80,000	9.0
South Australia	300,000	293,000	-7,000	-2.3
Western Australia	527,000	489,000	-38,000	-7.2
Tasmania	87,000	96,000	9,000	10.3
Northern Territory	44,000	42,000	-2,000	-4.5
ACT	66,000	76,000	10,000	15.2
Australia	4,571,000	4,940,000	369,000	8.1

Source: ABS, Australian Industry, cat. no. 8155.0, customised table

The ACT and New South Wales recorded the strongest growth small business in employment (at 15.2 per cent and 13.3 per cent respectively) between 2013 and 2018 while Western Australia experienced the strongest contraction (at 7.2 per cent) (see Chart 4).

Chart 4: percentage change in small business employment by state and territory—June 2013 to June 2018

Source: ABS, Australian Industry, cat. no. 8155.0, customised table

These figures might be explained by the New South Wales, Victoria, Tasmania and the ACT having the best performing economies in recent years. In contrast, the economies of Western Australia and the Northern Territory have experienced much more subdued economic performance—due in part to the slowdown in mining investment. Both Western Australia and the Northern Territory are also experiencing lower rates of population growth, housing finance commitments, and dwelling construction relative to the decade average.[5]

Growth in small business employment in the ACT is likely to have been influenced by downsizing and restructuring within the Australian Public Service which has created opportunities for private firms through contracting out of services. ABS data from the Labour Force survey shows private sector employment in the ACT grew by 18,600 or 13.9 per cent in the four year period between August 2014 and August 2018 which contrasts with a decrease in public sector employment of 2,400 or 3.1 per cent.[6]

Data from the ABS Labour Account shows the number of jobs filled in the private sector increased nationally by 1,097,000 or 10.1 per cent to 12.0 million in the four years to September 2018. During the same period jobs filled in the public sector increased by 188,500 or 9.9 per cent. The private sector accounted for 85.8 per cent of total jobs filled in this four year period.

More recently, in the 12 months to September 2019 the number of jobs filled in the economy increased by 343,400 or 2.4 per cent, with the private sector accounting for 96.9 per cent of this growth.[7]

Small business share of jobs in Australia

ABS Jobs in Australia data shows the contribution of the small business sector to jobs in the Australian economy. The data is sourced from the Linked Employer Employee Dataset (LEED) which provides insights into all jobs held throughout the year. A person can have a number of jobs throughout the year with one or many employers, some of which may be held concurrently with others. The LEED includes person and employer level information provided to the ABS by the Australian Taxation Office (ATO) and the Registrar of the Australian Business Register (ABR).[8]

There were around 5.6 million jobs held throughout the year in the small business sector in 2016‑17 (latest available data), compared with 4.9 million in 2012–13. Jobs were fairly evenly split between micro-businesses and firms employing between five and 19 employees (at around 2.8 million each in 2016–17).

The number of jobs in the small business sector in 2016-17 was 724,000 (or 14.9 per cent) higher than the number of jobs in 2012–13. By comparison, the number of jobs in medium-sized firms in 2016-17 was 219,000 higher (or 5.5 per cent) than in 2012-13 and the number of jobs in large firms was 322,000 higher (or 4.3 per cent).

This data source shows small businesses accounted for 57.2 per cent of total jobs growth between 2012–13 and 2016–17. Medium–sized businesses contributed 17.3 per cent and large businesses contributed 25.5 per cent. Small businesses accounted for 31.8 per cent of all jobs held in 2016–17 which compares with their 29.8 per cent share in 2012–13 (see Table 3).

The ABS Jobs in Australia series includes jobs in all industries, including public sector jobs held in Public administration and safety, Education and training and Health care and social assistance. These industry sectors are excluded from the ABS Australian Industry data.

Public sector employees are more likely to work in medium and large organisations than private sector employees. The inclusion of these employees contributes to a lower small business share of total jobs held by employees (at 31.8 per cent) in 2016–17 than the estimate of 43.8 per cent for the small business share of total private sector employment in 2016–17.

Table 3: jobs by firm size in Australia, 2012–13 and 2016–17

Firm size	Number of jobs				Growth in jobs
	2012–13		2016–17		2012–13 to 2016–17
	‘000	Share of total (per cent)	‘000	Share of total (per cent)	Change (‘000)	Per cent change	Share of total change (per cent)
Fewer than 5 employees	2,410.2	14.8	2,805.0	15.9	394.7	16.4	31.2
5-19 employees	2,455.9	15.0	2,785.2	15.8	329.3	13.4	26.0
Total small	4,866.2	29.8	5,590.2	31.8	724.0	14.9	57.2
Medium	3,975.1	24.3	4,194.3	23.8	219.2	5.5	17.3
Large	7,483.6	45.8	7,805.8	44.4	322.2	4.3	25.5
TOTAL	16,324.9	100.0	17,590.3	100.0	1,265.4	7.8	100.0

Source: ABS, Jobs in Australia, cat. no. 6160.0, Table 1.1

Small business contribution to national industry value added

Table 6 provides a breakdown of the contribution of small, medium and large businesses to Industry Value Added (IVA) for selected industries between 2010–11 and 2017–18. There is a fairly consistent pattern over the eight year period in terms of contributions from small, medium and large businesses to IVA. Over the eight year period small businesses accounting for between 33 and 35 per cent of IVA in selected industries of the private sector (see Table 4).

Table 4: small business share of private sector Industry Value Added (IVA) (per cent)

	2010-11	2011-12	2012-13	2013-14	2014-15	2015-16	2016-17	2017-18
Small	34.6	34.0	33.4	33.0	35.6	34.5	34.5	34.2
Medium	22.8	22.8	22.5	22.5	21.5	21.8	22.1	21.6
Large	42.6	43.2	44.0	44.5	43.0	43.8	43.4	44.2
TOTAL	100.0	100.0	100.0	100.0	100.0	100.0	100.0	100.0

Source: ABS, Australian Industry, cat. no. 8155.0, Table 5 (Parliamentary Library calculations)

Chart 5 shows IVA in the small business sector was $414 billion in 2017-18 which compares with $335 billion in 2012-13—an increase of $79 billion or 24 per cent.

Chart 5: industry value added by small businesses

Source: ABS, Australian Industry, cat. no. 8155.0, Table 5

Wage outcomes for employees of small, medium and large businesses

Employees of smaller firms receive on average lower average annual wages and salaries than employees of medium–sized and large–sized firms. However, growth in annual average wages for employees of smaller firms has been stronger in the five years to 2017-18 (at 3.7 per cent per annum) than growth in annual average wages for employees of medium and larger firms (at 2.7 per cent and 1.5 per cent respectively) (see Table 5).

Table 5: average annual wages for employees of small, medium and large businesses—2008‑09, 2012–13 and 2017–18

Firm size	Average annual wages ($)			Average annual growth in wages (%)
	2008-09	2012-13	2017-18	2008-09 to 2012-13	2012-13 to 2017-18
Small	25,495	28,100	33,657	2.0	3.7
Medium	47,811	51,109	58,216	1.3	2.7
Large	56,795	66,516	71,695	3.2	1.5
TOTAL	40,120	46,091	51,641	2.8	2.3

Source: ABS, Australian Industry, cat. no. 8155.0, Table 5 (Parliamentary Library calculations)

Note: These figures do not account for hours worked. There could be a much larger share of employees in small businesses in the ABS data that are working part-time hours (fewer than 35 hours per week) than in medium and large firms which may contribute to lower average wage outcomes. This data source does not provide a breakdown of hours worked or employee status. By way of comparison the ABS Wage Price Index (cat. no. 6345.0) grew by an annual average of 2.2 per cent in the five years to June 2018 and by an annual average of 3.4 per cent in the four years to June 2009.

Average annual wages for employees of small businesses were consistently less than half the wage of an employee of large businesses between 2008–09 and 2017–18. Average wages are calculated by dividing gross wages and salaries paid by businesses by the number of employed persons.[9]

Employees of small businesses are more likely to work part-time hours than employees of medium–sized and larger firms. Analysis of Household Income and Labour Dynamics in Australia (HILDA) data for 2015 shows just under 40 per cent of respondents who worked for smaller firms worked part-time which compares with a third of people working in medium sized firms and 22 per cent of people who worked in large firms at this time.[10]

Smaller firms are also much more likely to hire casual employees than medium and large sized firms. HILDA data shows around a third of respondents who worked in smaller firms worked on a casual basis in 2015 compared with a fifth of people who worked in medium-sized firms and just over 9 per cent of employees of large-sized firms (see Table 6).

Table 6: contract status of employees working for small, medium and large businesses in 2015

Firm size	Employee contract status
	Fixed-term contract	Casual	Permanent	Total
Small (per cent of total)	6.8	33.3	59.9	100.0
Medium (per cent of total)	10.0	20.0	69.9	100.0
Large (per cent of total)	12.5	9.4	78.1	100.0
TOTAL (per cent of total)	9.5	22.3	68.2	100.0

Source: Household Income and Labour Dynamics in Australia (HILDA), 2015 (Parliamentary Library calculations)

ABS data is also available for duration adjusted[11] median[12] employment income per job by firm size. The data shows median employment income for jobs in small businesses is consistently lower than the median for medium and large businesses between 2012–13 and 2016–17. Again these data are not adjusted for hours worked by employees.

Growth in median employment per job between 2012–13 and 2016–17 was highest for firms employing fewer than five employees (at 2.9 per cent per annum). In contrast, median employment income for employees of large firms grew at an annual average of 2.1 per cent, which is below the average of 2.2 per cent for all employees (see Table 7). According to the ABS Wage Price Index data (cat. no. 6345.0), wages in Australia grew at an annual average of 2.2 per cent between June 2013 and June 2017.

Table 7: median employment income per job by firm size—2012–13 and 2016–17

Firm size	2012–13	2016–17	2012–13 to 2016–17
	Current dollars	Current dollars	Change (dollars)	% change for whole period	Average annual change (%)
Fewer than 5 employees	25,000	28,000	3,000.0	12.0	2.9
5-19 employees	29,361	32,616	3,255.4	11.1	2.7
Medium	37,129	40,618	3,489.0	9.4	2.3
Large	49,648	54,009	4,361.2	8.8	2.1
TOTAL	39,555	43,189	3,634.4	9.2	2.2

Source: ABS, Jobs in Australia, cat. no. 6160.0, Table 1.1

Note: The data refers to duration adjusted median employee income per job for all employees excluding Owner Managers of Unincorporated Enterprises (OMUEs). An aggregated estimate for median employment income per job was not available for total small businesses (i.e. the combination of those employing fewer than five employees and those employing between five and 19 employees).

Conclusion

The small business sector continues to make a strong contribution to the Australian economy, accounting for a substantial share of total private sector employment growth between June 2013 and June 2018 and jobs growth between 2012-13 and 2016-17.

Small businesses contributed a smaller share of IVA compared with their share of total employment commensurate with their smaller scale and productive capacity. Employees of small firms also tend to be paid less on average than their counterparts in medium and large sized businesses which may be related to their greater use of casual and/or part-time employees.

The change in small business employment in various states and territories between 2013 and 2018 is likely to be related to differences in regional economic performance.