Labor Market, Inflation Impact Small Businesses

Nearly two-thirds of small business owners say that hiring challenges are hindering operations.

June 21, 2022

Difficulty Hiring

ALEXANDRIA, Va.—Small businesses are feeling the sting of labor shortage, with the number of employees at companies with fewer than 50 workers declining in three of the past four months, reports the Wall Street Journal. In contrast, staffing at large companies continues to grow.

Inflation is also adding pressure to small businesses as they struggle to keep up with the wages and benefits that big employers can offer their workers. Small business owners say that these HR challenges are “stunting growth” and “further clouding their deteriorating economic outlook.”

Nearly two-thirds (63%) of small business owners say that hiring challenges are affecting their ability to operate at full capacity, according to a Wall Street Journal survey.

“Small firms are still playing catch up,” Nela Richardson, ADP chief economist, told the Journal. If the economy weakens, small firms are also likely to change their hiring plans, she added.

The Journal reports that small business’ confidence is the lowest it has been since July 2020, with 9% of small business owners expecting U.S. economic conditions to improve during the next 12 months, down from 12% in May and 53% in June 2021. However, 52% of small business owners expect their employee ranks to increase in the coming year.

Small businesses are also increasing their wages and benefits—67% have boosted wages and 44% have added employee benefits. An organic-waste collection and compost-processing company in Manchester, Massachusetts, has 78 employees and starts its drivers at $18 an hour and offers employees an extra $3 an hour if they meet certain performance targets.

“That stopped the hemorrhaging, but it’s been tight ever since,” owner Conor Miller told the Journal. The company recently hired someone to help with recruiting and has increased company benefits. The company added a 401(k) plan last year and now allows employees to receive a portion of their pay in the form of bitcoin.

Low staffing impacts customer service. A tow company in Monterey Park, California, has 46 workers, down from nearly 70 pre-pandemic, and it can take two to three hours for the company to arrive at the scene of a call or pick up a stranded motorist, where it used to take 20-30 minutes when they were fully staffed. The company has received more complaints, leading to higher turnover.

NACS is hosting a series of webinars this summer on hot HR topics, summer focusing on innovative ways to address the labor shortage facing the convenience retailing industry. Attendees earn 1 credit hour from HRCI and SHRM for each webinar attended (up to 3 hours in total). Register today!