Just about half of all very small businesses in L.A. County do not provide any health insurance and only one-fourth provide any type of retirement plans for their employees, according to a survey released last week from Union Bank of California.
The annual survey of companies with revenues under $5 million also rated workers' compensation costs as the top concern for small business, followed by competition and increased taxes.
On the positive side, the survey found that 45 percent of small business owners have capital expenditure plans; of those 77 percent plan to spend more than what they spent in 2005. Also, 61 percent of the business owners said their fourth quarter 2005 sales exceeded sales for the fourth quarter of 2004.
"Small business owners are showing increasing optimism about their businesses, but there is rising concern about the ability to provide benefits," said Kei Matsuda, senior economist with Union Bank.
Indeed, 49 percent of the 360 respondents in L.A. County said they do not provide their employees with health care coverage, up from 39 percent in the 2004 survey.
Cost pressures are also hitting those companies offering health insurance. The survey found that 29 percent of respondents shifted health care costs to their workers while simultaneously reducing benefits.
A similar trend is taking place for retirement benefits. Only 24 percent of the companies responding to the survey said they provided full or partial retirement benefits (i.e.: 401(k) plans) for their employees. That's down from 34 percent in the 2004 survey.
"While rising costs are a big concern, part of this is also the nature of small businesses. They tend to provide entry-level job opportunities with limited benefits. Also, some of the companies are too new; they often start up as family businesses," Matsuda said.
Despite these rising costs, health care didn't place among the top three challenges small business owners face. The owners ranked workers' compensation as their top concern, followed by competition and increased taxes.
Yet the Union Bank survey found that only three percent of L.A. County respondents shifted any jobs or operations out of state. The few companies that did move transferred an average of 21 percent of their jobs or operations out of California.
"We're only talking about a dozen or so companies in our L.A. sample," Matsuda said. "Unlike with large businesses, moving is a big deal for small companies. They tend to be much more dependent on family ties, local networks and a local customer base."
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