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 (31-40)
If you’re broke and hurting from Covid you may not be able to afford to pay wages and the additional costs associated with that. Compensate in other ways. Maybe that’s a more flexible schedule or perks or a percent of profit but trading away a portion Of $100,000 is much better than keeping 100% of nothing. Your creative and inviting any at all times let them know that you value their assistance.
The wages are too low to compensate for the cost of living
I struggle to reply to this because I see a little of one side and a lot of another side. We have over 450 open jobs. Our customers have significantly increased pay rates, added sign-on bonuses, added attendance bonus incentives, etc. to attract talent, and STILL no movement. If we place employees on assignments, the same amount tend to terminate the same week. Therefore, we remain stagnant, while trying to recover our business, at the same time. It's a formula for failure for small business owners.
The government has painted the picture "the less you do, the more you get." We absolutely cannot rule out the additional unemployment being the reason for the limited amount of people returning to the workforce. We can't do that because the agencies are NOT doing enough to insure that these people really, truly need these funds, and it's a crying shame because people who really need the funds, are less likely to even apply for them b/c their integrity and dignity, doesn't allow it, since the government has created the lack of confidence the citizens have in assistance programs, so the stereotype becomes: people who seek benefits are lazy and looking for a handout. Well....all of that starts with the process of "qualifications..." I'm not sure why some people have the idea that everyone who requests benefits, really does need them. We can wish that was the case, but those folks need to get back into reality, or get into reality, if they've never been here!!
The biggest thing in all this is: due to no one wanting to work, but still wanting their daily essentials from the stores, and now probably even extravagant purchases they've never made before because they didn't want to live beyond their means, are now living beyond their means, and will fall into debt and credit issues as soon as they stop receiving assistance they never needed and/or the benefits were more than they were previously bringing home and they've adjusted to that lifestyle. In addition, those same essentials they want (we want/need) will be limited due to low production, due to no one to produce, and the cost of them will also increase, so not only are we giving away funds, we're setting small businesses up for failure...they will not be able to compete with the higher wages, when/if people do return to the workforce, due to this creation of a MUCH higher cost of living than pre-covid. They can't pass the cost increase through to customers who are struggling to make it, just like them. Wonder when they'll figure out that all of this is increasing the cost of living at the SAME time it's increasing wages, which results in ZERO additional income, so do we raise the poverty level now, too?? It doesn't take a rocket scientist...it takes an administration looking at all sides of the spectrum rather than just the sides they "believe" to be flawed! This whole "do less and we'll give you more" mindset is terrifying and detrimental to our recovery and the future of America. It's disheartening.
We pay $20/hr and appreciate our employees so much... I haven't ever had to post a job because folks are always asking to work for us. Maybe folks just don't want to be treated like employee #20,766 anymore, and tons of folks are starting their own freelance work instead of flipping burgers. Blaming the stimulus without data is pretty myopic.
I agree with the previous comments that confirm the unemployment benefits are lifesavers, NOT a problem.
You can't afford to pay a living wage to employees? Gee, that's too bad. You're not competitive in the job market.
That's how capitalism works.
Nobody should have to work 40 hours a week and still need food stamps.
Think $300 or even $500 unemployment is fat money that lets you sit around and do nothing?
Try living on it on long island. Let me know how that works out for you.
Stop blaming working people for not wanting to continue to take low paying, dead end thankless high stress jobs. Many have been studying, improving, looking for decent work. You can't find workers?
look in the mirror. There's your problem and there's your solution.
IMO, business have always benefited from differentiating themselves from their competitors, especially in the recruiting space. Problem now is that they are competing with the government hand outs. Business owners now more than ever have to take a look at themselves and figure out how to make working for them more appealing than the alternative. Its branding, plain and simple. That said, if you want to do what it takes and dont know how, connect with me and I'll show you. If you couldn't be bothered because it's too hard, focus on improving your existing team and processes in anticipation for the worker flood gates to open in a few months, if they open. Good luck.
We have never paid min wage, I cant find anyone to work that cheap, and the prevailing wage here is about $15/hr. An excellent argument for why min wages are unnecessary.
YOU DON'T GET UNEMPLOYMENT IF YOU REFUSE WORK. This whole argument is absurd.
After 64 years in business , we had to shut the doors forever. Not because a lack of business or loyal customers but lack of labor. Couldn’t serve our customers as they deserved with the skeleton crew. Hard decision that had to happen. With the stimulus running into September it left grim outlook to be able to acquire the workforce until then.
Many of the employers pay way below average wages for the types of jobs that are essential. Just because someone doesn't have a MBA doesn't mean that he/she is not valuable. Also, I don't believe that the government is paying anyone not to work. What I believe is happening is NOW for the first time, many individuals who have been in jobs that pay well below average, finally get a feel of what it is like to make ends meet without being soo exhausted running to work all week. We all need to remember what it feels like to have to work together and give our employees the opportunity to make a good living TOO.