The Small Business Labor Shortage: Where, Why, and How to Survive

There is an old folk song by American singer-songwriter Pete Seeger called: “Where Have All the Flowers Gone.” Well, my 2023 version of this song would be called “Where have all the Workers Gone.”

In this article, I want to dive deeper into the labor shortage plague affecting small business owners worldwide.

What countries are facing labor shortages?

No matter where you turn, there seems to be a labor shortage globally. Here are some very recent headlines from around the world.

1. US: Investopedia “Almost Half of Small Businesses Struggle to Fill Open Jobs” by Danial Clark, published March 10, 2023
2. Canada: ” Where have all the workers gone?” Alistair Steele, CBC News – posted July 23, 2022
3. UK: UK Parliament, House of Commons Library, Labour Shortage Research Brief, 2023.
4. Australia: NAB SME Business Insights: Labour shortages Q4 2022 – February 2 2023

Why are small businesses experiencing a labor shortage?

If you take a moment and think about it, you might say it doesn’t make much sense. Was it the covid-19 pandemic? Did so many businesses go broke during that time?

Let’s take a closer look at the reasons.

1. The pandemic’s negative impact on workers’ mental and physical health caused many people to quit their jobs, and forced companies to increase work-life balance expectations.
2. The shift to remote work, greater autonomy, and flexibility in the workplace, partly due to the pandemic, increased these factors.
3. The aging population. Many people 55 and above received government assistance during the pandemic and decided not to return to work.
4. The simple math says that fewer people will enter the workforce each year as the population gets older and the birth rate declines.
5. The economy has become more robust and created more job opportunities than the labor market can supply.

Additional issues can be considered, such as changes to a country’s Immigration Policies that may affect the flow of foreign workers.

Understanding America’s Labor Shortage

Stephanie Ferguson, Director, Global Employment Policy & Special Initiatives, U.S. Chamber of Commerce, in an April 7, 2023 release, stated, “Right now, the latest data shows that we have over 10 million job openings in the U.S.- but only 5.7 million unemployed workers. If every unemployed person in the country found a job, we would still have 4 million open jobs.”

According to Bloomberg, total savings, stimulus checks, and the inability to go out and spend money due to the Lockdown added $4 trillion to Americans’ collective savings accounts from early 2020.

The additional few hundred dollars Americans got each week from enhanced unemployment benefits (that ended in September 2021) specifically led to about 68% of the claimants receiving a much larger paycheck from unemployment than they did while working.

Childcare Labor Issues

Lack of access to affordable childcare was an issue even before the pandemic.

Post-pandemic reports indicate that even more issues were created when many providers shut down their businesses.

The industry lost 370,600 jobs, of which 95% were women, and there has been a failure to regain those pre-pandemic numbers.

How to Survive the Labor Shortage

Let’s face it; these staggering statistics present significant challenges for small business owners who must be creative, poised, quick, and persistent in their hiring approaches.

Old-school procedures and benefits are not going to be enough. The unemployed know they have the upper hand in today’s employment negotiations.

To be on top of the new hire experience, we have collected five responses that we believe will assist you in becoming the best recruiter in your industry.

1. Develop a Positive Workplace Culture and Become an Employer of Choice

A positive work environment and strong company culture can attract skilled workers. Foster a supportive and inclusive workplace by promoting teamwork, recognizing achievements, and providing opportunities for professional development. This also helps to retain employees, as happy employees are more likely to stay with your business.

2. Start an Employee Referral Program.

Your existing workers are a valuable resource to locate ideal candidates for open positions because they know the job and can quickly determine who would be a good fit for your company culture.

Here are a few ways to go about this.

• For a successful referral program, your existing staff must understand your priorities when making hiring decisions. So communicate clearly and prioritize vacancies that add the most value to the business.
• Describe your expectations for what type of worker you will likely hire for each job at your company. This will let your team make more knowledgeable choices to decide who to refer.
• Businesses commonly use money as an incentive when embarking on a referral program. For example, you can offer employees a small reward when they submit a referral, such as a coffee voucher worth $5, and a greater reward when you hire their referee, such as a gift card worth $100.
• If you are on a tighter budget, you can also award a prize at the end of the month or the year to the person who gives the most referrals. Or you could even grant a bonus to the employee who brings in the most permanent recruits over a certain period. The first option will raise the number of candidates, while the second selection will draw fewer but better candidates.
• Make your referral process easy. Your employees won’t use your referral program if they don’t understand it. So make sure you make it simple and intuitive for them to comprehend with minimal instruction or training.
• For example, if you’d like to hire for multiple positions, send separate emails to each team member detailing the job descriptions for positions. That way, they’ll be able to forward them to potential referees more easily. If this is the case, for instance, you’ll hire a shelf stocker and cashier; then you should split their job descriptions into two separate emails.

3. Get Up to Date with Technology

Good recruitment technology has a variety of purposes. For example, it can help you display your job listings to a broad audience, find the qualified candidates swiftly, and simplify hiring and onboarding. That is because a sound recruitment technology system speeds up the hiring process by:

• Using screener questions to help sort through applications or AI tools to shortlist preferred applicants,
• Creating continuity by setting up employment seekers and interview opportunities in the same place,
• Automating many of these processes, so you can hire and run your business effectively.

4. Sweeten the Deal

Winning the hiring process may include sweetening the deal and being the best opportunity by offering competitive compensation packages. Consider offering benefits such as:

• Paid time off,
• Training and upskilling,
• Comprehensive health plans,
• Retirement plans,
• Flexible work arrangements
• Advancement policies,
• Signing bonuses.

People you hire don’t want to be stagnant. Show them how they can grow and move up the ladder of success, and you can have them forever.

5. Recruit and Hire Interns.

Students always look for ways to improve their skills and pad their resumes.

Implementing an internship program provides your students with opportunities and can serve as a labor solution for your business during the busy seasons.

These programs are also great for accessing more help during the off-season.

It can be easier to recruit interns when there is a labor shortage as there is less competition from other employers.

It also opens up other channels. For instance, if you aim to recruit high schoolers from your community, you can create a mentorship program for students. By utilizing such a plan, you would typically have partnerships with local schools.

6. Automate and streamline processes.

Evaluate your business operations to identify areas where you can implement automation. Automating repetitive or time-consuming tasks can help alleviate the strain on your workforce and increase overall productivity.

7. Explore alternative approaches.

Assess your business model to identify areas where labor shortages are most acute. Then, explore alternative approaches such as outsourcing specific tasks, utilizing freelancers or contractors, or adopting technology solutions that can reduce dependency on human resources.

Conclusion

Remember, each business is unique, so tailor these suggestions to your circumstances. By being proactive, creative, and adaptable, you can navigate your worker shortage challenges and position your small business for success.
 

This completes our series on current issues affecting small businesses. Other articles in this series include:
Small Business Supply Chain Disruption: How to Survive
How to Survive Inflation as a Small Business Owner
9 Essential Cyber Security Tips for Protecting Your Small Business  
Navigating Economic Uncertainty: 7 Strategies for Self-Employed Small Business Owners
Issues Affecting Small Business: Compliance with Government Regulations