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Small Business Growth Helps Curb Impact of Big Layoffs

March 14, 1994

BOSTON (AP) _ Aline Kaplan lauds the advantages of working for a small company instead of a large one. But it wasn’t a switch she made voluntarily.

″I was part of a massive wave of layoffs,″ said Kaplan, a former Wang Laboratories Inc. employee who was let go in December 1989. She is now director of marketing communications for Chipcom Inc., a Southboro, Mass.- based computer networking company.

Kaplan is among many employees at Chipcom who came from Wang, Digital Equipment Corp., Data General and other high-tech giants that have cut staff in recent years.

The shift of employees from large companies to small ones helps explain why New England’s unemployment rate continues to fall even as major companies like Raytheon Co. and Fleet Financial lay off thousands of people.

″While firms are getting older and dying, others are being born,″ said Anthony Ferrara, regional director of the Labor Department’s Bureau of Labor Statistics.

Raytheon announced last Wednesday it would lay off 4,400 people as part of a restructuring plan. Fleet said Thursday it would cut 5,500 jobs from Northeast banking operations.

Announcements of major layoffs by large corporations inevitably get widespread attention. The start-up of small businesses, or gradual increases in hiring, do not.

″You don’t see it because it’s a couple people here, a couple people there, but it’s been going on,″ said Joseph Pellegrino, Massachusetts district director for the Small Business Administration.

″People who were middle managers are now striking out on their own,″ he said. ″Other companies that were in existence have been able to add employees.″

Chipcom is a good example. In 1989, it had 140 employees and sales of $17 million. As of December, it had 567 employees and sales of more than $150 million. About 160 people had been hired in the past year.

The Federal Reserve, in a report on business conditions released last week, said New England is continuing a gradual economic recovery. Moderate growth was predicted for the rest of the year.

While manufacturing and high technology jobs continue to decline, service and trade jobs are increasing. In Massachusetts, for example, manufacturing jobs decreased by 14,700, while service-related jobs increased by 52,600, according to state figures.

New England’s unemployment rate has fallen from 7.8 percent in January 1993 to 6.1 percent in December, according to U.S. Labor Department statistics. The January figure rose to 6.6 percent, but this can be attributed to a change in how the rate is calculated.

But Robert Langlais, spokesman for the Rhode Island Department of Employment and Training, said a drop in the unemployment rate doesn’t necessarily mean more jobs are being created. The numbers reflect only people who are seeking jobs.

″People dropped out of the labor force,″ he said. ″People said they just weren’t looking for work.″

The figures also don’t reflect the number of people who left the state, he said.

Connecticut’s unemployment rate for January was only 4.5 percent, but that ″gives you an incorrect impression of the economy in Connecticut,″ said John Carson, president of the Connecticut Policy and Economic Council, a public policy think tank.

Carson said the figure also doesn’t take into account the number of business people who were laid off and now call themselves consultants - people like John R. Henri of Suffield, Conn.

Henri was chief financial officer for NERI, an international environmental services company. After he was dismissed in September, he started a consulting business.

″I would love to see it work as a full-time situation, but if I were going to have a good full-time situation come forth to me right now, I would jump at it, quite frankly,″ he said.

So far, he’s earning much less than he did before, said Henri. ″That’s why I’d rather have the full-time job.″

Kaplan acknowledged that smaller companies often don’t pay as much as larger companies do.

But she said she doesn’t compare her income at Chipcom with what she earned at Wang. She prefers to compare it with what she earned during the eight months she was unemployed.

″It wasn’t a matter of taking a pay cut,″ she said. ″It’s all in your perspective.″

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