As Inflation Concerns Grow, Business Owners Forced to Pay Employees More

Employee salaries at small businesses have increased for 19 consecutive months, according to a new report.

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Amid growing concerns over inflation, salaries at the nation's small businesses have been creeping up month by month for more than a year and a half, according to a national payroll  survey released this week.

The average annual salary paid by small employers in March was $31,791, a 1.6 percent increase over the past 12 months and the 19th consecutive month of gains, according to data from 18,000 small businesses compiled by SurePayroll, a Chicago-based payroll firm.

"That’s the highest average salary we've seen since we started tracking the small-business economy," SurePayroll President Michael Alter said in a statement. "These strong gains in personal income don't seem to be losing steam."

Labor costs represent up to 70 percent of total small business expenses.

While higher salaries can help the economy by fueling consumer spending, it can also spark inflation as employers pass on higher labor costs by raising prices, Alter said.
 
So far this year, that doesn't appear to be happening, according to the National Federation of Independent Business, a Washington-based lobby group.

In a survey of more than 700 small employers nationwide, only a net 13 percent reported higher selling prices in February, the third-lowest reading since January 2004, the group reported last month.

Another positive sign was that more small firms also said they were planning to boost employment in the months ahead -- despite the tighter labor market, the group reported.

According to SurePayroll, hiring is on track to increase by 4.5 percent this year, following a 0.2 percent decline in 2006.

Eighteen of the 21 benchmark states tracked by the firm increased in size last month, including big gains in New Jersey, Utah, and North Carolina.

Of 113.4 million non-farm private sector employees in the United States, 57.4 million work for business with fewer than 500 employees, while 41 million work for business with fewer than 100 employees, according to the Small Business Administration.