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Changes in the world economy during the 1980s signaled the need for new development strategies for rural communities. The increasing integration of rural communities into national and world economies presents both opportunities and threats for local economic growth. While some rural communities have grown through increased exports, others are faced with instability associated with rapid changes in global product and capital markets. As a consequence, community leaders throughout the world have shown a renewed interest in promoting the growth of locally-owned, small businesses.

Community leaders and rural development specialists are faced with deciding what economic development strategies will provide the greatest benefit to the local labor force and the community at large. Because leaders and specialists are accountable to the public, they need to be aware of possible consequences of alternative economic development strategies. There is no ideal employer size to solve all the economic problems of a community, but a careful evaluation can help a community decide whether it should abandon industrial recruitment efforts and focus exclusively on "home-grown" job creation strategies.

To aid in the evaluation of the small business approach to rural development, this report analyzes the effects of employer size on wages and employee benefits. The second section of the report discusses recent rural trends and the emergence of small business development programs as a policy response to these trends. The third section presents an overview of the policy debate concerning employer size and its effects. The fourth section describes the study area and the data samples used in preparing this report. The fifth and sixth sections present the findings of the study regarding wage and benefit effects of employer size. A summary and discussion of policy implications are presented in the seventh section.