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Where San Diegans Work: Fact Check

Statement: “More than 90 percent of San Diego businesses are small businesses. Employing over 60 percent of the workforce, our region’s economic recovery depends on the success of local entrepreneurs and the jobs they create,” San Diego Council President Pro Tem Kevin Faulconer wrote in a Dec. 1 U-T San Diego op-ed. Determination: Barely True

 

Image: Mostly TrueStatement: “More than 90 percent of San Diego businesses are small businesses. Employing over 60 percent of the workforce, our region’s economic recovery depends on the success of local entrepreneurs and the jobs they create,” San Diego Council President Pro Tem Kevin Faulconer wrote in a Dec. 1 U-T San Diego op-ed.

Determination: Barely True

Analysis: City Councilman Kevin Faulconer, who represents District 2 residents, recently greeted new Mayor Bob Filner with a U-T San Diego op-ed.

In the Dec. 1 column, Faulconer called on Filner to work collaboratively with the City Council to address key concerns. He included two statistics to emphasize the importance of cutting red tape and regulations so small businesses can thrive.

One figure Faulconer cited caught our eye. He claimed more than 60 percent of the region’s workforce is employed by a small business.

We’ve previously confirmed small businesses make up more than 90 percent of the city’s firms but we’ve never analyzed how many San Diegans work for those companies.

We started by asking Faulconer’s staff members where they got their figures.

A spokesman for Faulconer cited the following line in a May City News Service story published on the KPBS website:

San Diego is home to around 90,000 small businesses, making up 90 percent of companies and employing 64 percent of the workforce, according to the San Diego Regional Chamber of Commerce.

But a Chamber of Commerce spokeswoman couldn’t point to a report that included that figure. We also reviewed several recent studies on the Chamber of Commerce website and couldn’t find any that mentioned the workforce number cited in the story.

Before you can determine how many small business employees exist, you need to know exactly what is considered a small business. That’s where things get tricky.

There are varied definitions of a small business, even within the federal agency charged with representing their interests.

The federal Small Business Administration’s Office of Advocacy generally considers companies that employ fewer than 500 staffers small firms for statistical purposes. The same agency’s Office of Size Standards considers multiple variables for government contracting and other purposes.

Meanwhile, the San Diego Regional Chamber of Commerce’s working definition of a small business is fewer than 50 employees. The city of San Diego’s cutoff is even narrower: businesses with 12 or fewer workers.

We asked Faulconer for his definition of a small business. A spokesman referred to the Small Business Administration’s varied metrics but cited a conservative definition of up to 100 workers.

We kept that definition and the others in mind as we reviewed data from the state’s Employment Development Department, which administers unemployment insurance and collects lots of labor information.

We zeroed in on a 2011 report that focused on the San Diego metropolitan area and provided information about private-industry employees in the region, meaning government workers and unemployed San Diegans weren’t included in the tallies.

Here’s what we found:

• The San Diego metropolitan area has 92,581 businesses with fewer than 500 staffers. Those companies employ 875,908 people, or 85 percent of area’s private sector workforce.

Again, this is the metric the federal government generally uses for research purposes.

Economists Lynn Reaser of Point Loma Nazarene University and Jordan Levine of the Los Angeles-based Beacon Economics both endorsed this way of defining a small business, though each acknowledged most San Diegans probably wouldn’t use the same characterization.

• Firms with fewer than 100 staffers employ 606,317 workers or about 59 percent of the workforce, closer to Faulconer’s estimate and his definition of a small business.

At least one local organization also uses the fewer-than-100 benchmark to calculate small business statistics. A data analyst for the San Diego Workplace Partnership, a local group that regularly analyzes local labor trends, said his group only considers companies with 10 to 100 staffers small businesses for statistical purposes.

• Businesses with fewer than 50 workers employ about 44 percent of the regional private-sector workforce.

That’s the way the Chamber of Commerce generally defines small businesses in its economic impact reports, though the organization has also cited the broader federal statistics to provide a national perspective.

So where does that leave Faulconer’s statement?

The councilman could have better vetted the workforce statistic before including it in his U-T San Diego op-ed. His statement would be close to the mark if one only considers the private-sector workforce, but Faulconer wasn’t that specific.

The overall picture changes if you also consider the region’s large public-sector workforce.

San Diego’s most recent bond prospectus, a document that details how investors will be repaid, lists four government entities among the top five employers in the city. They are the United States Navy, the University of California-San Diego, the San Diego Unified School District and San Diego County. Those four alone employ about 112,627 staffers.

Adding more public-sector workers and unemployed San Diegans to the workforce total would certainly decrease the total percentage of workers who report to a small business each day.

Our definition of “barely true” is a claim that has an element of truth but is missing critical context that may significantly alter the impression the statement leaves. We think that ruling applies here because Faulconer’s total, while not far from the mark for private-sector employment, would likely change dramatically if the total workforce is considered.

If you disagree with our determination or analysis, please express your thoughts in the comments section of this blog post. Explain your reasoning.

Lisa Halverstadt is a reporter at Voice of San Diego. Know of something she should check out? You can contact her directly at lisa.halverstadt@voiceofsandiego.org or 619.325.0528.

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Disclosure: Voice of San Diego members and supporters may be mentioned or have a stake in the stories we cover. For a complete list of our contributors, click here.

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