Some small businesses are still struggling to hire skilled workers, even as Americans are returning to the US labor market in droves.
Hiring and retaining employees remains the biggest challenge for small businesses, according to a survey of 1,100 companies by Goldman Sachs 10,000 Small Business Voices released last week. Ninety percent of hiring companies struggle to find qualified candidates for open positions.
In general, the American labor market is in turmoil. A surprisingly strong recovery from the brief but devastating coronavirus recession has left companies scrambling to recall workers they laid off in the spring of 2020 and to find new ones. Over the past year, US employers have created an average of more than 540,000 jobs per month. The Labor Department is expected to report Friday that employers hired another 396,000 last month, according to FactSet.
But small business owners think the job market is a two-fold story. Eighty-eight percent of respondents to the Goldman Sachs survey say that small businesses struggle relative to larger businesses in their local communities. Forty-two percent say they have lost employees to larger companies that pay more.
“Small businesses struggle to compete with large employers on wages and benefits and cite a lack of skilled workers,” said Joe Wall, country director of Goldman Sachs 10,000 Small Businesses Voices.
Data from payroll processing company ADP shows a widening hiring gap between companies with 500 or more employees and companies with fewer than 50 employees. These small businesses have lost jobs in three of the last four months.
In March, employers announced a record 11.5 million job openings. The United States now has two job openings for every unemployed person. But many small businesses say they are struggling to convince candidates to apply for vacancies, especially in the hard-hit leisure and hospitality industry. Owners take on more work themselves and improvise other ways to get by.
“I’m afraid of burnout. … It’s frustrating, very frustrating,” said Shirley Hughes, owner of Sweet Cheats bakery in Atlanta.
Sweet Cheats had nine staff members at the pre-pandemic peak. Now Hughes has two more herself. She has reduced her opening hours – closing time has gone from 8:30 p.m. to 6 p.m. and now to 4 p.m. – giving her and her two bakers more time in the kitchen. Still, Hughes says she now works 80 to 90 hours a week.
Inflation is another challenge. Higher spending not only hurts companies’ bottom lines, but also affects their ability to retain and attract workers. Before the pandemic, Hughes was getting hundreds of applicants for openings. Now she says she’s lucky to have one or two, and they tend to want $18 or $20 an hour, while she offers $14 or $15 to experienced bakers.
Hughes had to add benefits to his two longtime employees to retain them.
Teresa Depola is also taking on more work herself due to a lack of available help. She opened Betty Boops Diner in Albany, New York, 10 years ago with her husband and son, and continued to run it after she and her husband divorced.
While she’d ideally have three employees to run the place, lately she’s been a one-person workforce: kitchen, waitress, and even delivery.
“It’s small enough that I can do it myself, not bad,” she said. Still, she would like to add staff so she can serve dinner again. It only serves breakfast and lunch and has closed at 3 p.m. since the start of the pandemic. And she doesn’t see the job image improving anytime soon.
“I don’t think that’s going to change for a while,” she said. “I’m going to keep things as they are right now, people aren’t ready to work right now. I still have a lot of trouble finding staff.
While most major U.S. industries have clawed back jobs lost to the pandemic, employment in recreation and hospitality has fallen by 1.5 million, or 8.7%, since February 2020, according to the Bureau. of Labor Statistics.
Many in the industry have faced burnout after being on the frontlines for two years of the COVID-19 pandemic, said Rob Wilson, president of human resources provider Employco. Some who stayed in the industry moved on to bigger restaurants where wages could be higher. Others left and sought new opportunities.
“There’s no one to hire, there’s no one looking for a job,” said Anesh Bodasing, who opened Tiffin Box, a fast-casual Indian restaurant in West Palm Beach, Florida. in 2019 with 20 employees.
Last year, in April 2021, Bodasing temporarily opened a second food hall location. But then the staff shortage started to hit home.
“Your employee level has gone down and the salary you pay has gone up. From the employers’ point of view, this is the wrong equation,” he said.
Bodasing has closed the food hall stand and only three employees remain at the West Palm Beach location. He plans to change the company to use less staff.
“Let’s assume the job shortage isn’t going to change,” Bodasing said. “You can sit back and fight or pivot and change the business in a way that will keep us going even during the shortage.”
One option is to replace the cashier station with an automated kiosk, which allows customers to order and pay. Another possibility is to introduce meal plans, where customers pre-order a minimum of five meals that they can eat or freeze.
“You just have to think outside the box; literally nothing is on the table,” he said.
Matt Ensoro, founder of Wing it On! chicken restaurants, rose to the challenge of keeping a full staff of 35 employees at the company’s two corporate restaurants in Waterbury, Connecticut, and Raleigh, North Carolina. (The chain also has 9 franchises with more in development.)
“We thought it’s pervasive in our industry, we need to change our strategy,” he said. Ensoro found it was competing with other restaurants just to get applicants in – people were scheduling an interview and not showing up 90% of the time. So the chain started offering people a free lunch or dinner if they showed up. The ratio went “flip-flop,” he said, and most applicants came in for the interview.
Meanwhile, at the Raleigh site, located near North Carolina State University, the company began offering workers grants: $1,000 if they worked a full year or $500 if they worked a semester. The program has been a success, and the company plans to increase the amount for full-year workers to $2,000 next year.
“It’s not something inevitable anymore that you can put an ad and people walk through the door and you hire them,” Ensoro said.