Some small businesses are still struggling to hire qualified workers, even as Americans return to the U.S. job market in droves.
Hiring and retaining employees remains the top challenge for small businesses, according to a survey of 1,100 businesses by Goldman Sachs 10,000 Small Business Voices out last week. Ninety percent of businesses that are hiring are finding it difficult to recruit qualified candidates for open positions.
In general, the U.S. job market is sizzling. An unexpectedly strong recovery from the brief but devastating coronavirus recession left companies scrambling to recall workers they had laid off in the spring of 2020 and to find new ones. Over the past year, U.S. employers have added an average of more than 540,000 jobs a month. The Labor Department announced Friday that employers hired another 428,000 workers last month.
But small business owners believe the job market is a tale of two recoveries. Eighty-eight percent of respondents in the Goldman Sachs survey say small businesses are struggling relative to larger companies in their local communities. Forty-two percent say they have lost employees to larger businesses that are paying more.
“Small businesses are struggling to compete with larger employers on pay and benefits and cite a lack of qualified workers,” said Joe Wall, National Director of Goldman Sachs 10,000 Small Businesses Voices.
Data from payroll processing firm ADP show a widening gap in hiring between businesses with 500 or more employees and businesses with less than 50 staffers. Those smaller businesses have lost jobs in three of the past four months.
In March, employers advertised a record 11.5 million job openings. The United States now has two job openings for every unemployed person. But a large number of smaller businesses say they’re having trouble getting candidates to even apply for openings, particularly in the hard-hit leisure and hospitality industry. Owners are taking on more work themselves and improvising other ways to get by.
Olivia Hazell, the assistant director of Kreative Minds Early Learning Center, a child care center in Northwest Baltimore, said the center has been searching for workers — teachers, assistant teachers and teacher’s aides — for weeks now. But it has been hard to find candidates qualified to serve as teachers, she said.
“The struggle is to get people with certifications,” she said. In the approximately three weeks Kreative Minds has been actively hiring, they’ve only interviewed one person — who was interested in the aide position rather than the teacher position, which Kreative Minds more urgently needs filled.
Inflation is another challenge. Higher expenses not only hurt businesses’ bottom lines, but also affect how well they can retain and attract workers.
Child care is already a low-paying industry, with a median salary of $27,490 according to the Bureau of Labor Statistics. Hazell said she knows the center’s salaries are unappealing to some potential applicants — they range from $25,375 – $29,120, according to a post advertising the center’s job openings that was recently made in a Baltimore-area group on Facebook. But because Kreative Minds is a newer center, having opened only three years ago, they can’t afford to match the salaries of some of the higher-paying child care providers in the area, she said.
That’s on top of child care being a less enticing industry amid the pandemic; because children below the age of 5 are not yet able to be vaccinated against COVID-19, some people are unwilling to take the risk of working with children, even though Kreative Minds continues to require masks.
“We have heard that … some of our older adults aren’t readily available to jump in and work with that group, because they’re just not sure,” Hazell said.
For many employers that can afford to pay their workers well, the ongoing worker shortage has had little impact. Underground Pizza, a Detroit-style pizzeria started during the pandemic, pays all workers at least minimum wage, even if they are included in the restaurant’s tip pool, making it easy to recruit for those positions. Positions not included in the tip pool all get more than minimum wage, which is currently $12.20 for businesses with less than 15 employees and $12.50 for businesses with 15 employees or more.
“I don’t come from a restaurant background … so we’re just different, and that kind of played to our success to this point,” said Evan Weinstein, the founder of the restaurant, which now has two locations and another opening this week in Towson.
Weinstein’s background is in the entertainment and events industry, and he went into his first venture in the food industry knowing that “you have to pay people correctly if you want them to work,” he said. The only time he has had any trouble finding workers was last summer, when the company first instated a vaccine mandate for workers. Now, all three locations are essentially fully staffed, although the company is hosting a hiring event Monday night to fill in a few last spots as they prepare for the Towson restaurant’s opening day.
According to Jeremy Schwartz, an associate professor of economics at Loyola University Maryland, inability to raise wages or offer other benefits, like bonuses or paid time off, to employees is a major reason small businesses are facing especially significant hiring challenges at this point in the pandemic.
But, he noted, businesses could offer some incentives that don’t cost them anything, like a regular schedule. Some large restaurants or store chains ask their employees to work irregular hours, which can make it difficult for those them to schedule other things in their lives. A small business offering their workers the same hours every week could be appealing.
“Increasing compensation is not something that they can often afford, (but) it’s something that really has to happen,” he said. “Businesses have to find some way to make it more enticing.”
Smaller businesses also tend to be more likely to fall within the industries that were hit the hardest by the pandemic, like hospitality, meaning they are likely to have laid off employees in the first place, he said. According to the BLS, while most major U.S. industries have regained the jobs lost to the pandemic, employment in leisure and hospitality is down by 1.5 million, or 8.7%, since February 2020.
“Restaurants, hospitality, dry cleaners – those are all on the smaller end,” Schwartz said. “Those are the ones, just by nature of what happened, that are trying to find workers.”
Some business owners have found new strategies for getting candidates in the door. Matt Ensero, founder of Wing it On! chicken restaurants, faced 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 nine franchise locations with more in development.)
“We thought, this is pervasive across our industry, we have to change our strategy,” he said. Ensero realized he was competing with other restaurants just to get applicants in the door — people would schedule an interview and then not show up 90% of the time. So, the chain started offering people a free lunch or dinner if they showed up. The ratio “flip-flopped” he said, and most applicants came for the interview.
Meanwhile, at the Raleigh location, which is near North Carolina State University, the company started offering scholarships to workers: $1,000 if they worked for a full year, or $500 if they worked one semester. The program was a success, and the company plans to increase the amount for full-year workers to $2,000 next year.
“It’s not something that’s a foregone conclusion anymore that you can put up an ad and people will walk through the door, and you hire them,” Ensero said.
The Associated Press contributed to this story.