During the recession of the late 2000s, the unemployment rate in the Springfield metropolitan area rose to 9.5 percent, forcing many out of the labor market. As the recession faded and the economy rebounded, more people have now found gainful employment. The current area unemployment rate is 4.2 percent. For workers who have gained jobs over the past seven years, the trend has been positive. However, low unemployment presents some challenges for small business.
The current climate means more disposable income for consumers and higher demand for “income elastic” goods — products that are not necessary but are nice to have. Small businesses may benefit from this trend because of increased demand for products and services. But because the opportunity is coupled with a tight labor market, small companies may need to hire additional employees, who are now more difficult to recruit due to competition for limited applicants.
The National Federation of Independent Business reports that in a recent poll of small businesses, 13 percent of respondents said labor quality as their biggest problem. More than 80 percent indicated they had too few applicants for open positions. Quantity is an issue, but quality also becomes problematic as the least qualified people remain unemployed and available. Small businesses must be even more careful than larger counterparts when hiring. “Small businesses have less ability to absorb unexpected financial blows, making them more cautious when it comes to hiring anyone who doesn’t match the job description completely,” according to the NFIB.
There is evidence that the tight labor market is challenging small businesses in the Springfield area, with construction and home improvement as a specific example. The recession forced trained workers out of the labor force. “I was better off during the recession,” states Ryan Green, owner of First Choice Construction, a local contractor. “There were people who needed to work, so as long as I did my job, stood behind my work, and did business fairly, I did fine. Now, there is more work than there are people to do the jobs. Even offering a good wage and some benefits, it’s difficult to compete.”
In a tight labor market, how can small businesses compete? Small businesses offer unique work environments that can’t be matched by larger competitors. A recent Inc. magazine article offered some helpful suggestions:
- Share. Employees like to be invested. Having a say in how a company grows and evolves makes them invested in the company’s success.
- Perks. Reasonable bonus structures, gift cards for a job well done, or even regular “thank yous” may go a long way toward attracting and retaining workers.
- More flexibility and work-life balance. Small businesses understand the unique personal situations of employees and can be more accommodating on a case-by-case basis. Find ways to allow work from home or utilize unique work hours or other options that make the job more appealing.
- Use resources. There are options available to small businesses that allow them to pool resources for benefits such as health care and retirement.
Small businesses have unique challenges as well as unique opportunities. Finding the right balance between these is key to successfully managing a tight labor market and taking advantage of opportunities to profit and grow.
Barry Cobb is an associate professor of supply chain management and logistics in the Department of Marketing at Missouri State University. He holds a Ph.D. from the University of Kansas and conducts research and consulting in the areas of operations and supply chain management.
This article appeared in the November 5, 2016 edition of the News-Leader and can be accessed online here.
References:
Bureau of Labor Statistics (2016), “Economy at a glance,” September 2016. http://www.bls.gov/eag/eag.mo_springfield_msa.htm (accessed Sept. 29, 2016).
National Federation of Independent Business (2016), “August 2016: Small business economic trends,” August 2016. http://www.nfib.com/surveys/small-business-economic-trends/ (accessed Sept. 29, 2016).
Page, Bubba (2015), ” 4 ways small businesses can compete with big business employee benefits,” November 2015, http://www.inc.com/bubba-page (accessed Sept. 29, 2016).