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 (21-30)
This will be my last post about this. You can spout stats etc all day but the bottom line, if someone can't make more working than they can on the dole, then more power to them staying home taking care of themselves and their families. We are so willing to stand on someone else's head to "be in business". It should have been in your business plan before you started, to be able to pay your employees a living wage. They are humans just like you and deserve to be treated with respect for their day's work, no matter what the work is. If you can't afford to pay for your employees, then you shouldn't be in business. If we as a people can't afford to educate our fellow citizens to be able to take on the work that they need to be trained for, then shame on us. Just remember every human deserves as much as you do. I hope that you can hear me.
Seems to me that there ought to be a study with ACTUAL unemployed folks as to why they are not applying.
Attention Employers
You want people back at work. Try paying a living wage. $15.00 ph would be a good start. Extended unemployment benefits are just a stop gap measure to keep food on the table while corporate twiddles its thumbs on minimum wage for needed workers. Who can survive on $7.25 an hour.
Employees
Unionize and get back to work.
No. People just don't want to go back to the same miserable pay they were getting before the pandemic, or just the job in general was awful and they don't want that anymore because they've had more than enough time to think about it. Many are still looking for a better job, others are creating the job they want by becoming entrepreneurs.
If you want good employees then you must treat them with respect and pay them decent wages. Blaming unemployment benefits is not the problem, it's the corporate values that are. Let's start treating people as humans and not numbers, let's start valuing them, and then you will see an improvement.
Heartening to read so many responses challenging this talking point from the side of misinformation that misleads the country. Why spread this nonsense?
We used our savings and profits to keep everyone working during COVID. It was an investment but now that things are picking up we have a full staff of great employees that are very loyal. I understand that was not an option for a lot of SMBs and agree that daycare and school closings as well as uncertainty and fed benefits are equally if not more to blame for shortages of employees.
All I know is that I recently posted a job (around $20 p/h) and had over 100 applicants. I had highly overqualified people literally begging me to hire them because they wanted to get back to work. I was able to hire a well qualified person. Even if someone feels that the unemployment benefits are good they have to know they won't last forever and it's in their interest to seek employment.
If $300 is enough to keep someone from working, something is wrong with the job. Why should people work for slave wages? If the pay is that low, maybe they need to keep the $300, while employed. Or better yet, pay people a living wage.
As someone in the animal healthcare industry I see an overall feeling of employees that we are done trying to live on wages barely above minimum wage with no benefits. Many of us have associate and/or bachelor degrees. We are tired of living with our parents or in-laws to get by, while employers have second homes. Pay a living wage, treat employees with respect, then you will fill positions. Stop blaming the government, or calling employees greedy.