Nonemployers are not nonfactors in economy.

• Position: Nonemployer businesses in North Carolina - Brief Article

The first U.S. Census Bureau study of nonemployer businesses - sole proprietorships, partnerships and corporations with no paid employees - concluded that 419,000 Tar Heel nonemployers pump $14.6 billion a year into the economy. Scott Daugherty. executive director of the North Carolina Small Business and Technology Development Center, discusses the report.

BNC: Who are nonemployers, and do they constitute a large, stealth segment of our economy?

Daugherty: They're typically businesses that don't pay wages except possibly to direct family members. They're a stealth segment only in the sense that they're microbusinesses that don't get the credit they should for contributing to the economy. David Birch, the professor who left MIT to form Cognetics Inc., which studies business behavior, talks in terms of elephants, gazelles and mice. Elephants are Fortune 500 companies that are declining in share of national employment. Gazelles are small and fast-growing but make up only 2% to 4% of employment. The real growth is in mice, the microbusinesses.

Is this related to downsizings and layoffs?

Absolutely, particularly in connection with the major manufacturers. Microbusinesses are really a phenomenon of the last 15 to 20 years, when we've seen a sharp increase.

Why has there been such a sharp increase?

It's attributable to changes in characteristics of the economy and other factors. Partly, people want to achieve greater control over their lives. We've observed that there's often an external factor underlying the decision to start a business. You might just be unhappy in your current workplace, but layoffs, a major life change or a modest inheritance are factors, too. The place of work becomes less important.

Nationally, 70% of business establishments are nonemployers. How does North Carolina stack up?

Historically, we lagged. But the economic transition of the last decade and a half in North Carolina -- downsizings of major manufacturers, particularly in traditional industries such as furniture and textiles - really increases the pace of self-employment. We're close to tracking the national average now.

In your State of Small Business 2000 report, you note a nearly 1-to-1 ratio of Tar Heel businesses forming and failing. Isn't that a lot of churning?

Yes. One characteristic of our economy is low unemployment but a lot of volatility in the employment marketplace. A lot of micro-businesses are temporary. When IBM here in Raleigh did its first layoffs...