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Hiring by small business in California is up by 5.7 percent through September, but the average small business paycheck is down by 5.9 percent over the same nine months, according to figures compiled by SurePayroll, a Chicago area company which processes payroll for more than 3,500 California small businesses.
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Of 21 states included in SurePayroll's study, only four -- Washington, Nevada, Michigan and North Carolina -- saw the average paycheck increase. Of the 21 states, nine saw payroll numbers drop with the remainder increasing the number of people employed by small business, the company says. Nationwide, the number of employees is up 2.5 percent, but the average paycheck is down by 3.3 percent, according to SurePayroll.

"Salaries at small businesses continue to trend down on average," says Michael Alter, president of SurePayroll. He says his company's study is the only one which is based on what people are actually being paid.

Mr. Alter says his research raises the possibility of salary deflation. Unless it's just a temporary phenomenon, it could stall economic growth, he says.

"Our hope is that the ongoing economic recovery hits the small business bank accounts and they are able to pay employees more. It's important that things turnaround at small businesses because the long-standing belief is that they are the engine of economic recovery because they move quicker than larger companies," Mr. Alter says.

SurePayroll bases its national reports on data it collects from more than 13,000 small businesses which it defines to be anywhere from one to 100 employees. "We've conducted research that shows our customer profile corresponds well to the national demographic for small business, so we think our customer base is a good proxy for what's happening throughout the country at all small businesses," he says.

Copyright © 2004. San Jose Business Journal.