Supply chain disruptions are the most common reason small businesses face difficulties. A shortage in microchips can cause delays in automobile and durable goods production. It also affects lumber production, produces, and many other areas. Many small companies are having difficulties restoring operations, many of them in another company’s “supply chains.”
However, even if supplies or goods are in short supply, another input is required – labor. According to the NFIB Small Business Economic Trends survey, 48% of small companies reported open positions. This was a 47-year record. More than 60% of small business owners say there is a shortage of workers, with more than 20% describing the problem as “critical” for their business. Over 80% experienced a loss in sales as a result of the labor shortage. 19% reported severe losses.
Although there are roughly the same number of job openings at firms as unemployed people, it is not possible to match them geographically or by skill. Although people move around, not enough to reduce the gap between available workers in a given year and job openings. However, ongoing childcare and health issues can keep otherwise employed people on the sidelines. Much money has been sent to consumers by the government’s stimulus program, both directly and as supplemental unemployment benefits. More than 14 million public are receiving unemployment benefits, both federal and state. Before Covid-19, approximately 2 million people received honors. This income encourages many people to wait until they can find a paid job. Often, these jobs pay less than unemployment benefits. Most of these programs will end in September.
The labor force is the number of workers and those looking for employment. Unemployed have also not increased as anticipated, decreasing the supply of workers. Even with solid GDP growth, it is still somewhat puzzling that total employment is lower than pre–Covid-19 levels. Owners are reporting record numbers of raising worker pay to attract workers. However, if there is no growth in the labor force, any hiring success will be at the expense or disadvantage of another employer and will not increase total employment. An increase in the labor force will lead to growth, as well as a decrease in unemployed.
To combat the shortage, 63% of employees have increased their wages, 13% have increased their paid time off, and 13% offer a signing bonus. Fifteen percent of the respondents provided rewards for successful referrals, and 15% offered enhanced medical benefits. Owners work more (79%), 41% gave more hours to part-time employees, and 60% to full-time workers. Three-quarters of owners adjusted their hours to accommodate the available workforce, and almost a quarter reduced their product offerings. 29% of the crew was also made more productive by introducing new labor-saving technology.
Employers have tried almost all possible measures to alleviate the labor shortage problem. These problems can be solved when potential workers feel safer returning to work and schools reopen to solve the childcare problem.