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:

• Revenue, Customers, & Costs: How to Take on Your Top Challenge 
• May Road to Recovery Report
• Small Business Recovery Gets Shot in the Arm