Record Number of Small Businesses Raised Wages in May
It looks like a number of employees saw a bit more money in their paychecks last month as a record number of small business owners report raising wages in May. According to the Wall Street Journal, the latest survey by the National Federation of Independent Business (NFIB) found that 35% of respondents increased labor compensation. That marks the single highest percentage the survey has seen since it started in 1986.
The record response continues a trend that’s been developing that finds small business owners increasing their wages in an effort to attract talent as unemployment drops. To that point, just today it was announced that the U.S. economy added 223,000 jobs in May, with unemployment falling to just 3.8%. That level is the lowest seen in 18 years, tying April of 2000.
Nearly a quarter of small business owners say that finding qualified workers is currently their top problem. At 23%, the response is just one point shy of the all-time record set in 2000. While the work shortage is affecting numerous sectors, the biggest hit has come in construction. However businesses in transportation, travel, manufacturing, and others have also reported larger than average impacts.
Commenting on the latest report and what it means for small business owners, NFIB Chief Economist William Dunkelberg said, “Labor markets are very tight, for both skilled and unskilled workers,” also saying, “The availability of qualified workers is impeding the growth in employment. Job openings are at record high levels.” Meanwhile NFIB President and CEO Juanita Duggan noted, “This month’s jobs report demonstrates that small business owners’ optimism is showing no signs of abating. They are increasing compensation at record levels and are continuing to hire.” Duggan went on to say, “Post-tax reform, concerns about taxes and regulations are taking a backseat to their worries over filling open positions and finding qualified candidates.”
It’s also worth noting that the NFIB’s finding comes just over a month after a separate study by the National Association of Business Economists (NABE) found 90% of companies surveyed were hiring. That survey also found 33% of overall businesses raising their wages — just a couple of points lower than the most recent NFIB numbers. Additionally one-third of businesses said they were attempting to make up for the labor shortage but training current employees for promotions.
Obviously lower unemployment rates and higher wages are both good things for the economy at large. However, as hiring becomes more difficult, it can be stressful for small business owners to keep up with their output while dealing with a shortage of manpower. While raising wages to entice potential candidates may be an easy solution, owners might also want to consider some creative forms of compensation, changing their methods of hiring, and making other efforts to ensure their businesses gets the help they needs.