Are Unemployment Benefits Crushing Small Business?
In a recent poll, half of you said you were struggling to find employees—and you’re not alone. A growing labor shortage is pummeling industries, from restaurants to retail, manufacturing to healthcare. And it’s putting a damper on revenue and recovery as a whole.
With so many open jobs and so few applicants, the question is: Why?
There’s no doubt that the extra unemployment benefits and stimulus offered by the federal government are a factor. In last week’s poll, 54% of you agreed. So does the Chamber of Commerce, who blamed the poor jobs report on the extra assistance. It might be time for the government to step back and get out of the way.
So, just how bad is the worker shortage and how is it hurting you and small businesses around the country? And what role do the additional unemployment benefits play in it? Let’s take a look.
Hiring is Hurting and Small Business is, Too
Here’s how big of a problem the shortage is now, according to governmental data and what you shared in our recent polls.
Alarmingly fewer jobs added than expected
Many economists were predicting a huge uptick in added jobs in April—around one million. But the real amount was almost a quarter of that, with a payroll increase of only 266,000 nonfarm jobs, according to the jobs report.
But plenty of jobs are available
There are, however, more jobs available than ever. There were 8.1 million job openings at the end of March, a record high.
Extreme difficulty filling positions
So there are less jobs being filled and more job openings than ever, which means hiring for open positions is a major headache. In one of our recent polls,
- 50% of you said you can't find enough people to fill open vacancies.
- When you do fill the roles, 51% of you have to pay more than you were pre-pandemic.
Devastating Effects of the Labor Shortage
We finally have the means and customers to recoup what we lost and have to turn away business because we can't get anyone to work.
So how is the hiring difficulty holding real businesses back? Here are some devastating circumstances from members like you.
“We are a small to medium HVACR company in the northwest suburbs of Chicago and are struggling to hire at least one new employee. We need two in the near term and are having no traction,” says Don Cook from Cooks Heating and Cooling Co.
“Finding employees has never been so difficult. We have the work now, the wages are high, and there is little to no interest,” says Deborah Whalen from Molly Maid of Cary & Johnston County.
“We finally have the means and customers to recoup what we lost and have to turn away business because we cannot get anyone to work,” says Bruce Sherman of Trains on the Move.
“We use independent contractors to fill our private duty case. ...We end up having to charge more to get a caregiver to take a case, which hurts the families we serve. …It has gotten 100% harder to fill cases than it was before COVID. We always get it done, but it is much more challenging than it used to be,” says Leslie Sedille from Paradise Home Health Care.
What Role Do the Extra Unemployment Benefits Play?
So why is there a labor shortage in 2021 in the first place? The top reason, according to those of you in the retail and restaurant industry, was the $300 supplemental unemployment amount. Nearly a third of you pointed to this as the cause of your hiring shortage.
Though it’s a complex issue, there’s no denying that government support (the extra unemployment benefits and stimulus payments) are major contributing factors.
“We find it difficult to employ factory production workers because of government top-ups. Workers can make more money sitting at home,” says John McGrather from JEM Strapping Systems Inc.
“We can’t keep paying people not to work...We can’t recover without getting people back to work,” says Bill Achor from York Ag Products Inc.
And the Chamber of Commerce agrees. In their statement, they clearly state what they believe is causing the issue and what should be done about it.
The disappointing jobs report makes it clear that paying people not to work is dampening what should be a stronger jobs market.
“The disappointing jobs report makes it clear that paying people not to work is dampening what should be a stronger jobs market. …One step policymakers should take now is ending the $300 weekly supplemental unemployment benefit.”
In fact, many states will be withdrawing from the program in the next month or so, ending the $300 added benefit as a way to incentivize people to go back to work. That list includes: Missouri, Wyoming, Idaho, North Dakota, Tennessee, Mississippi, Alabama, Arkansas, South Carolina, and Montana.
What Other Reasons Might Be Causing the Shortage?
People cannot ‘sit home’ and collect unemployment… The truth is people are sick of being described as ‘workers’ and have lots of options.
There are likely multiple reasons for the shortage that span beyond the extra unemployment payout. Recent media coverage points to things like:
- Workers not feeling safe enough to return to the job
- Limited childcare options forcing women to stay home
- A reevaluation of values causing people to go new directions in their employment and lives
- A desire for more livable wages
- Pandemic restrictions preventing businesses from hiring foreign seasonal employees
“People cannot ‘sit home’ and collect unemployment… The truth is people are sick of being described as ‘workers’ and have lots of options—no more low wages, punitive management, and no healthcare,” says Monica Pursley from Western Revenue Services.
“We need community outreach for the workforce—without knowing what exactly is keeping those who are able to work from applying for jobs, we won’t fully recover for a very long time,” says Melissa Blair from Pawsitively Professional Pet Services.
“If your business cannot afford to pay a living wage, it either should be owner run or not be a business at all. Expecting people to live below the poverty line and leaving it up to the taxpayer paid social assistance programs to make up the difference is just wrong!” says Chris Cooke of The Mailbox Shipping & Receiving.
Your Turn: Is Government Support Holding Small Business Back?
After seeing the data and reading a few perspectives, what do you think? Is government support stalling recovery? Is it time to end them? Or are there other changes that would more meaningfully impact recovery?
Weigh in below and share how the hiring shortage is affecting your business.
Have hiring questions or want to talk this out with others like you? Join the hiring group to kickstart the conversation now.
For more data-backed insights from members like you, check out these reads:
Comments (1-10)
Blaming the stimulus is admitting that the job you offer is so crummy that $300 a month is more enticing than working for you. I owned a toy store with one employee. They made $15 per hour. Nothing on Earth could have enticed us to leave our awesome workplace. Let’s stop talking about jobs, and attempt to turn our businesses into organizations that people aspire to join.
Nope. The stimulus has between very little, to nothing to do with finding a workforce - and the mounds of data proves this. I could sit here all day long and and cite links. Better yet, use your own common sense. Option 1) An individual could stay home and get $300.00 for only the next several weeks or, 2) work making $400.00 p/w ($10 p/h) or more, permanently. Now, what's your argument again? You can't find a good hire? Look in the mirror for your reason.
I am sick to death of the one-sided half truths that miserly, whining employers throw around about the federal $300 enhancement. $300 comes to just $7.50 per hour over a 40 hour work week, and most of the jobs out there are 1) less than full-time (a good way to avoid paying benefits), 2) a work schedule that changes from week to week (advertised as "flexible" work schedule), 3) grueling work - if anyone thinks fast food or grocery store work is a breeze, try working just one shift. Between the physical strain of being on one's feet, often standing in one position for hours, and dealing with the public, often with no breaks, and 21 states are still following the federal minimum wage of $7.25 per hour, is there any wonder that people aren't rushing to APPLY for these jobs?
The other part of this equation is that employers, that includes all the miserly, whining employers, are required to report to their state unemployment office when they have offered work to an applicant who then turns down the job in order to continue collecting unemployment. That's right, if you offered a job to an applicant who is currently collecting unemployment benefits, and that applicant turns down the job offer, the employer should be reporting that.
But we aren't hearing reports from state unemployment offices of thousands of people being kicked off of their rolls for turning down work offers in order to keep collecting unemployment benefits. Why not?
Could it be that the issue is that people aren't applying for these low-wage, part-time, un-benefitted jobs with changeable work schedules? Could it be that the miserly, whining employers have been tweaking the narrative a bit to imply that they are offering jobs and applicants are saying "no thanks"? Why aren't state unemployment officials stepping in to clear up this misrepresentation?
I am hopeful that we are at a turning point and will begin treating people with respect. Liveable wages NOW, not moving towards $15/hour over a period of years. Sick days, vacation days.
I don't know anyone who has turned down a job offer, but by darn, I am in support of all workers who are using this moment to call attention to what is a great embarrassment in this country where stockholders, executives and the 1% have gotten even richer with their greed during this crisis that has pushed millions of workers over the precipice.
Work that offers dignity and respect for everyone. We can do this.
This is not true. Shame on blaming the stimulus for low job hiring!
I am sorry but I totally disagree with the thesis.
I hire sound engineers, camera men, teleprompter operators, actors, and lighting people. I have zero problem finding folks to work for me.
The issue is that most service industry jobs do not even come close to paying a living wage. If you adjusted the minimum wage for inflation it would be somewhere around $26 per hour.
I earned minimum wage when I got out of college in 1977- with it I was able to rent an inexpensive one bed room apartment, own and insure a used car, buy my own food and have a few bucks left over for a movie on the weekend.
Let me see you try and do that on $7 per hour today!
It is criminal that companies have been allowed to pay such low wages that even full time workers still qualify for public assistance.
Who can blame a person who doesn’t want to work for what amounts to below subsistence wages.
It makes my blood boil when I hear people blaming pandemic assistance on “spoiling” the workforce.
That is such a disingenuous argument, pay people a fair wage, and treat them right, and they will be banging the door down to work for you!
I do think the extra $300 per week plays a role.
In Ohio, regular unemployment is half what you were making before. If someone was making $15/hr, that's $1200 per month. With the extra money, that's $1200 per month more. That's $2400/month, possibly a bit more accounting for the fact that a month isn't exactly 4 weeks.
If I pay $15/hr (my staff starts at $14/hr but several make more), they'd get paid the same to work or not work. These are not "slave wages" nor "unlivable" wages. But it's hard to convince someone to come do a job for the same amount of money as NOT doing a job.
The people we do have tend to stick around. We have a low turnover rate among our entry-level people and a non-existent turnover rate among our supervisor and management-level people. We try to treat our staff really well.
But we still can't hire people. We can't even get candidates to apply.
I'm not blaming people -- I might do the same thing if I felt stressed and had a break for the first time in years. But it's still where we are.
Jeannine Ruiz said it very succinctly. Who in their right minds would stay home for $300 per week instead of getting a job that would enable them to provide a better life for their families? The idea that a $300 weekly payment is competition for the job market, says a great deal more about the job market than the people who are unemployed.
How is this even plausible?
A measly $300 weekly cannot adequately cover living expenses for anyone. So choosing to stay home and receive that over a job seems like no choice to me.
The question here is not whether the benefit is crushing small business, it's how could an unemployed individual possibly choose this benefit over working?
I think that a closer look is warranted at the businesses themselves and the wages being offered.
Are they offering a living wage?
Are incentives being offered?
As business owners, we must understand that although we are in business to be profitable our growth and survival depends on having a motivated workforce who buy into our organizations mission and vision. Our businesses thrive when our workforce thrives. Fair wages and benefits are a great starting point. Maybe, just maybe if these were being offered there would be no issues finding a motivated workforce.
Pay more. Make jobs more attractive. Offer health care, decent amount of vacation pay, and sick days. You will get a line out the door. What worked before the pandemic will not work afterward. People are realizing life is short and want to feel a sense of happiness and satisfaction from the work they do.
I don't buy it. If $300 a week extra is keeping people from working for you you need to take a look at both the working conditions and pay at your organization. We've had no problems hiring.
I'm sorry, but there are too many companies in this country that don't pay a living wage and then want to blame the stimulus or workers for not wanting to come back to work making so little that they're collecting food stamps and welfare despite working.
This article is nothing but a parrot of Business Rountable talking points from CEOs that are afraid that paying their workers might make their yacht payments slightly less affordable.
In reading the comments, people seem to be very confused into thinking that unemployment is set at $300 a week. It’s not. It’s whatever your state unemployment level was PLUS $300 a week. In my state, it used to be 900/ month and now it’s $2000. Why on earth would an unskilled, entry-level worker enter the job force at $10-$14 an hour when they could stay home and make 12.50/hr for doing nothing?? When the extra $300 was announced my candidate pool completely dried up. I run my business with a 2% net margin so if I can’t hire those entry level positions here in the US at $12-14, I’m left with no option but to offshore them.