Costs overwhelming small businesses.

• Position: Health Insurance

One leading cause of the decline in job seekers choosing to work for small businesses may be related to the absence of adequate health care benefits, reasons John A. Challenger, chief executive officer of Challenger, Gray & Christmas, Inc., Chicago, Ill., an international outplacement firm.

A survey of 3,000 jobless managers and executives in the first quarter of 2003 found that 54%--as opposed to 72% three years ago--preferred to work for a small company. "The inability of small business to convince executives and managers to join their firms will slow the economy's pickup once the downturn ends. Some small [firms] may find it necessary to absorb much of the cost of health care to 'out-duel' big business and win the talent they need," Challenger relates.

"The growing inclination toward large companies probably stems from the fact that these employers are more likely to provide decent, if not far superior, health care benefits compared to small firms. With health care costs increasing at such a dramatic rate, small employers are lucky if they are able to provide any health coverage, let alone the type of extensive coverage that large employers can offer at a lower price."

Health care costs for employers increased an average of 13% nationwide in 2002. In a recent Robert Wood Johnson Foundation, Princeton, N.J., survey of 600 businesses, companies of all sizes expect these costs to increase another 18% this year. Some 92% of companies indicate they are likely...