Hiring And Wage Trends Send A Clear Signal To Small Business: Lure Workers Or Lose Them

The U.S. labor market is experiencing an unprecedented labor shortage. Not only is the national unemployment level hovering near a 50-year low, but employers are far more reluctant to lose the talent they already have. According to the Bureau of Labor Statistics’ February 2019 jobs report, nearly twice as many employees quit their jobs (40.1 million) than those that were either fired or laid off over the course of 2018 (21.9 million).

Labor In Demand

While this trend has implications throughout the private business world, small to medium-sized businesses (SMBs) are feeling the brunt of the tight labor market’s impact. According to historical data from ADP’s monthly employment report, hiring among businesses with fewer than 50 employees slowed by more than 50 percent over 2019’s first-quarter compared to that same span in 2018. At the same time, companies with more than 500 employees actually increased their workforce by nearly 18 percent year-over-year.

However, while hiring among SMB is slowing, wages within the segment and across the private business world remain elevated compared to previous years. Nationally, wages rose by a little over 3 percent in 2018, but that figure was only about 2.5 percent for SMB employees according to the Paychex Small Business Employment Watch.

It’s not difficult to see the connection between these statistics: SMBs are losing talent to larger companies, and salary is likely a key factor. Since larger firms typically exhibit wider margins than most SMBs, they have the upper hand in attracting employees seeking to take advantage of the high worker demand.

The Capital Gap

Operating expenses, as well as seasonal or industry risks, are huge barriers holding back SMB owners from growing their payroll or expanding employee benefit plans. This increased pressure on SMBs is part of the reason why fintech lenders like Credibly have gained traction over the last decade by providing access to smaller, faster and more targeted loans and other forms of financing,

“We’ve noticed an increase in alternative short-term financing solutions being used to stabilize cash flow,” said Ryan Rosett, Co-Founder and Co-CEO of Credibly. “As SMBs grow their benefits and staff to compete with larger competitors, it’s critical that they maintain enough working capital to cover their growth and everyday expenses.”

This discrepancy is nothing new. What is new is the current scarcity of skilled labor. Historically, SMB’s have been able to draw talent by offering more growth and development prospects than their plus-size counterparts. But to remain competitive in the near-term, SMBs may need to offer improved salary or benefits to attract the talent they need to grow.

Credibly and other SMB lenders provide healthy businesses the opportunity to buffer themselves from unexpected expenses or seasonal revenue drawdowns. Meanwhile, the extra capital this affords can be used to expand operations, increase marketing and, of course, attract higher quality talent.

There is obviously no silver bullet to the current labor shortage for businesses large or small. However, while big business has money on its side, SMB owners still have a few tricks up their sleeve.

Credibly is a content partner of Benzinga