A shortage of qualified workers
Confidence is high among small-business owners, but filling available jobs has become a challenge.
Why are small businesses optimistic about the future?
They expect good times—and low taxes—ahead. The most recent monthly report from the National Federation of Independent Business (NFIB) shows that small-business owners are enjoying high levels of confidence, with a score of 107.6 in February, the second-highest rating in the index’s 45-year history. By comparison, confidence levels were in the low 80s at the nadir of the Great Recession. Credit President Trump’s tax cuts for much of that confidence: “Policy changes—lower taxes and fewer regulations—are transformative for small businesses,” says NFIB president Juanita Duggan. The strong economy is helping, too. The Federal Reserve has increased its expectations for overall GDP growth this year from 2.5 percent in December to 2.7 percent today. “After years of standing on the sidelines and not benefiting from the so-called recovery, Main Street is on fire again,” Duggan says. Still, some challenges remain.
What are the challenges?
Ironically, the low unemployment rate. A tightening labor market gives job seekers the upper hand in job searches, as they can be pickier about where they work. Small businesses often complain about having trouble competing with bigger companies for top talent, and that’s even more the case when there are fewer available workers. Indeed, the NFIB reports that finding qualified employees is currently the top problem facing small-business owners. “Employers need a surge in the labor participation rate to begin to see relief from the effects of labor shortages,” says NFIB chief economist Bill Dunkelberg. Another hurdle: In some parts of the country, business owners in manufacturing and other blue-collar trades say it can be hard to find applicants who can pass a drug test.
How are businesses responding?
Many small companies are offering better salaries and benefits. In a February Wall Street Journal survey, nearly 60 percent of more than 730 responding firms said they had recently boosted wages to entice applicants. Beyond bigger paychecks, companies are also offering to pay for vacation costs, gym memberships, class credits, and other perks. Brian Krenke, president of KI, an employee-owned furniture maker based in Green Bay, Wis., is looking to hire 300 new people and notes that, unlike in the past, he’s more focused on what potential hires are looking for. “We want them to walk away from the interview saying this is really an organization we want to work for,” he says. “You really need to be much more flexible and accommodating these days.”
Are there other ways to find workers?
Some small businesses are aggressively recruiting fresh faces by partnering with local schools or unions that can provide a pipeline of new applicants. Other firms, finding themselves stymied by a lack of applicants with the requisite skills or who can pass a drug test, are bolstering internship, apprenticeship, and training programs. In Youngstown, Ohio, Chris Cruciger and his father, Bill, owners of a roofing firm, are working with a local nonprofit group, Flying High, which provides job training and drug treatment, to find candidates. “We could take on twice as many projects if we had more suitable workers,” Chris Cruciger said. Other companies are opening new locations where they hope to find a greater supply of potential workers. “Employers are getting more creative in attracting and retaining workers,” says Mark Zandi, chief economist at Moody’s Analytics. “They are going to have to get much more creative going forward.”
Are minimum-wage increases a factor?
Some small-business owners are offering more pay, but many still struggle to cover the bare minimum. While the federal minimum wage has stayed at $7.25 an hour since 2009, 29 states and Washington, D.C., have set higher hourly minimums, ranging from $7.50 to $12.50. To start 2018, 18 states and 19 cities raised their local minimum wages, many to $12 to $15 an hour. And that may be great for workers, but it can be a heavy burden for small companies. Regina Chan, owner of Prolific Oven—a family-run café and bakery that’s been around since 1980 and is located in Sunnyvale, Calif., where the minimum wage went up to $15 an hour on Jan. 1—is struggling with the change. “Of course I want the best for my employees,” she says. “But the big picture is that I need to keep the doors open. Because if I don’t, everyone gets laid off.”
What tariffs mean for small businesses
Not all of President Trump’s policies have been so small-business friendly. His recent move to impose high tariffs on foreign-produced steel and aluminum seems to be a mixed bag for small-biz owners. On the one hand, Richard Garber, owner of industrial heating company Kelsifahr, Inc., in Minneapolis, expects the tariffs to have a negative impact on his company’s sales. “The president’s proposed steel/aluminum tariff has the potential to be disastrous,” he says, because steel prices will likely go up. But Corey Merz, managing partner of Meyer Ice Cream, a manufacturer of soft-serve ice cream machines based in New Albany, Ind., hopes tariffs pay off in the long run. “The tariffs on steel and aluminum would definitely increase the cost of the products we build, and that cost would be passed on,” he says. “However, if this would create jobs in the U.S., I would not have a problem paying a little bit more for material.”