As if small-business owners haven't faced enough challenges over the past year and a half. While the dust is settling on the pandemic, a new crisis has emerged: Companies can't find workers to hire. Job openings have reached the highest levels on record, while hiring levels have stalled. The hiring crisis is particularly problematic because not only is it crushing several industries key to the economic recovery, such as restaurants and manufacturing, but it is also concurrently happening while unemployment levels are still 50 percent higher than pre-pandemic levels, suggesting the cause, and therefore the solutions, is not straightforward. If post-Covid unemployment levels are 50 percent higher than pre-Covid levels, how can small businesses be having such a hard time filling job openings? And what should small-businesses owners do about it?
The hiring crisis is the result of a perfect storm of post-Covid factors. While the debate continues as to whether Covid unemployment benefits are keeping workers out of the workforce by providing a better financial situation by staying home than working, the reality is that this is likely one of the contributing factors, but not the only one. People have left the workforce for a variety of reasons, including the fact that child care is more expensive than wages (and schools have opened before businesses), people were and remain afraid of going back to work in some industries because of health safety, and, yes, of course, if a greater financial benefit from staying unemployed versus working exists, then workers may choose to stay home. This financial benefit may also allow workers to be more selective with the jobs they choose, and take time in doing so. This would be particularly true for those unemployed with more time left in their careers and less financial responsibility. As a result, industries where the workforce is made up more of younger workers (like the restaurant industry) are suffering more from this crisis.
The hiring crisis is particularly crushing for America's small businesses because the unmet demand for workers is also contributing to an upward pressure on wages. Even prior to Covid-19, many small businesses' greatest challenge was competing with increasing wages by large competitors like Amazon and Walmart. "The big guys can afford to pay higher wages without going out of business, but we just can't -- we'll go out of business," suggests Vince Bartozzi, co-founder and CEO of Stakes Manufacturing, a small Ohio-based B2B print-on-demand company. Thus, even if a small business can find the workers to hire, the increasingly higher wages they need to offer to compete will destroy profit margins and subsequently threaten survival.
Saddled with both a hiring crisis and a higher wage environment, small businesses need to employ even more creative and aggressive strategies in both hiring and retention.
1. Focus on Targeted Recruiting
Employers should contact employees who were laid off or left the work force during Covid and hopefully use pre-Covid goodwill and post-Covid benefits to entice employees back. Employers may also focus recruitment efforts on those groups particularly hurt during the pandemic in terms of employment who may be more eager to rejoin the workforce. For instance, women have accounted for nearly 56 percent of workforce exits since the start of the pandemic, despite making up just 48 percent of the workforce, while Black and Hispanic workers faced 1.6 to 2 times the unemployment rates of their White counterparts.
2. Use Size to Your Favor for Retention
While small businesses may not be able to match the wages of Amazon or Walmart, the benefits outside of money of working at a small business rather than an Amazon should be communicated and capitalized on. "We may not be able to pay Amazon wages, but we'll do more for you in the long run", Bartozzi suggests. "You may not start at a competitive wage, but if you stay with us for six months or more, we'll invest in you, and there are far more job opportunities with us than at Amazon." Because of sheer size, small businesses can integrate a more personalized approach to the working environment. "I know at least 75 percent of my employees by name. And those whose names I do not know it is only because they work shifts during which I am physically not in the state. If I'm there, I know who you are," Bartozzi continues. The more that small businesses can integrate and communicate this type of long-term and personalized approach to employee satisfaction and progression, the more that employees may see the benefits of choosing a smaller employer even if initial wages are less competitive.
The current hiring crisis in the United States represents a serious barrier to our economic recovery, and, unfortunately, small businesses are again hurting the most as a result. While many factors contributed to this situation, employers increasingly find themselves in a higher-wage environment with more job openings and less hiring.
Hopefully, the coming end of Covid unemployment relief may help incentivize more unemployed workers to enter the workforce as the other factors (like school openings and increased health safety) also make the choice to work more financially viable. The government would also do well to provide the same financial benefit to finding a job as remaining unemployed, as many states are also considering in lieu of federal unemployment funding.
And, in the meantime, before the government addresses this problem with a policy response, the onus is on small businesses to continue to exert the same level of creative energy to solve this people problem that was used to survive an unforeseen global pandemic and economic shutdown. Unfortunately, the ending of one crisis for small businesses is only leading to the beginning of another.