A retail store listing a full-time job outside its open door on May 10, 2021 in Oceanside, California, United States.
Mike Blake | Reuters
The Delta variant hasn’t materially changed the outlook for American small business owners, but the conditions in which the Main Street economy operates in an attempt to reopen entirely are weighing on business owners across the country.
According to CNBC, for the third quarter of 2021, half of small business owners (50%) say it has become more difficult to find skilled workers compared to a year ago | Momentive Small Business Survey. Almost a third (31%) say they have not filled any vacancies for at least three months, compared to 24% in the last quarter and 16% in the first quarter of 2020.
The work situation has led 41% of small business owners to say they are currently facing rising wage costs, according to the new CNBC | Momentive survey conducted between July 26 and August 3 of over 2,000 small businesses in the United States
“It turns out that it’s really confusing to get the economy going again after months of shutdowns, layoffs and homework,” said Laura Wronski, research science manager at Momentive. “Unfortunately there is no on or off switch, and these labor and supply shocks that we see are fully expected on our way back to normal, even if they are disruptive in the short term.”
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The national unemployment rate is heading in the right direction and last Friday’s latest job report showed the strength of the recovery in new hires. But the number of job vacancies has risen to over 10 million, according to the Department of Labor, the highest level in history, meaning there are over a million more jobs available than people looking for them.
“This hypergrowth in the hiring rate means workers have the bargaining power to get better wages before going back to work or leaving their current job for higher paying opportunities. That’s especially tough for small businesses, who likely don’t have the same resources as their larger competitors, “Vronsky said.
According to the survey, only a minority (24%) of small businesses expect staff increases in the next year, and in the last two to three months only 16% of small businesses said they had increased their staff.
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Jill Bommarito, Founder and CEO of Detroit-based Ethel’s Baking Company, which supplies national corporations such as Whole Foods, UNFI, and Dawn Foods, is facing this pressure, especially as national corporations raise wages to $ 15 and up and get benefits like paying for college add education.
“In small businesses, there are other ways to provide growth opportunities and a faster path to growth and advancement, but keeping everyone happy with wages is difficult,” said Bommarito, who is a member of the Goldman Sachs 10,000 Small Businesses Voices coalition, which identified similar business concerns in its recent survey. “We had to raise everyone’s wages twice across the board this year, and we were seen as leaders.”
The workers take advantage of the tendency of the balance of power in the labor economy.
“We get people who sign up for an interview and decline or say they have 14 interviews or say, ‘I have three options, can we talk about hourly wages before I even come and see you?'”
The Q3 CNBC | The Momentive survey shows that 32% of small business owners say they have raised wages in the past three months to attract workers, while 27% have offered more flexible hours and 24% more on-the-job training. Fewer offered additional services, including advanced medical (8%), educational services (7%), and childcare or elderly care services (5%).
Ethel’s Baking Company has added long-term and short-term disabilities, dental and eyesight, and $ 2,000 in education, but cannot afford to pay for college education for workers, as recently announced by Target or Walmart. “We can’t offer college education. Everything goes up all along the line for us, our raw materials, our packaging, our sleeves, logistics, wages, social benefits, all of that, and it wasn’t the typical 1% to 2%, but 18%, “said Bommarito.
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While labor shortages are a major concern for small businesses, CNBC | Current survey results show that it’s not even as extreme as the supply bottlenecks and related disruptions in the supply chain that small businesses still have to deal with.
Four in ten small business owners say they are seeing rising wages for their employees right now, but seven in ten are seeing rising material costs.
“The worst thing is that many small business owners are affected by all these factors at the same time,” said Vronsky.
She found that 86% of those who say they have rising labor costs also have rising delivery costs.
“Unlike their larger competitors, small businesses won’t be able to bear these costs for long. If they haven’t already, at some point they will raise prices to keep going, ”Vronsky said.
The survey shows that more companies (39%) raised prices than those that raised wages (33%).
Ethel’s sales have grown sharply, but with lost profitability from higher wages and benefits and higher entry prices, Bommarito said it “feels inevitable” that more small businesses like yours will raise prices.
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However, the difficult operating conditions have not resulted in a large drop in small business confidence. The CNBC for the third quarter of 2021 | Momentive Small Business Survey finds that general business sentiment on Main Street is unchanged from Q2 2021, although the Delta variant has become a bigger problem for the economy.
Owners who rated business as good (36%) rose from last quarter (34%), while those who rated business as poor fell 1 percentage point to 17%. The percentage of small businesses that expect sales to increase over the next 12 months (45%) and those that expect sales to remain the same (34%) remained unchanged from the second quarter of 2021.
According to the survey, the majority of companies (66%) say they can operate for more than a year under current conditions.
The Delta variant could still change Main Street confidence, especially as consumers pull back. The CNBC | The Momentive poll shows that at this point in time, only 21% of the non-small business owners surveyed in the study say the Delta variant “changed their outlook” “very much” for the remainder of 2021. But 41% say their attitude has changed “a little”.
When asked about the Delta option, the response from small business owners was similar: 19% said they had changed their outlook “a lot” and 37% said they had changed their outlook “a little”.
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