The COVID-19 pandemic continues to have a tremendous impact on U.S. small businesses, particularly on smaller “Main Street” establishments.

While restrictions have been eased and the economy is on the rise, business owners are reporting a new, significant barrier to recovery: a shortage of workers.

SCORE surveyed about 16,000 entrepreneurs in July. The 1,712 who responded capture the voices of business owners with employees and/or those looking to hire.

June 2021 marked the fifth consecutive month with record-high readings for unfilled job openings (seasonally adjusted). The U.S. Department of Labor reported 1 million more job openings than expected in June, rising to 10.1 million. Since March 2021, the number of unfilled job openings rose 20 to 26 points higher than the 48-year historical average.

Small businesses play an important role in the United States labor market, and they are often considered the “lifeblood” of the U.S. economy. They employ 47.1% of all U.S. workers and contribute to 41% of all U.S. economic activity.

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Much of the current research and reporting focuses on worker perspectives, attitudes and drivers to achieve employment. The SCORE survey focused on employment gaps through the eyes of small business owners.

Two key findings of the report are:

1. Small businesses are struggling to hire.

  • Employment challenges currently rank highest among business owners. “Hiring the right talent” is the Number 1 challenge (63.4% of business owners), overshadowing “finding customers,” followed by “retaining or motivating employees.”
  • Two-thirds of business owners (61.2%) report having unfilled job openings within the past six months.
  • 89.5% of business owners see hiring new employees as somewhat or very difficult. Once employees are hired, 69.9% have difficulty with onboarding and 62.9% cite troubles with retention.
  • Pressure to increase wages to stay competitive now impacts twice as many business owners (54.7%) compared with 2017 survey results (26.2%).
  • 70.3% more business owners cite lack of health care benefits as a barrier to hiring, compared with 2017 survey results.

2. Small businesses require help to recover.

  • Despite recent challenges, 67.2% of business owners surveyed report feeling optimistic about the next six months. This shows little decline compared to 2017 survey results showing 69% optimism.
  • 56% of business owners plan to hire employees in the next six months.
  • 60.5% of small businesses have increased wages to attract and retain employees.
  • 43.6% of business owners now use job posting sites with growing success. Still, “word of mouth” from other employees (56%) remains the top way to attract new employees.
  • When asked what resources would be most helpful for small business success, owners cite better health care options (51.1%) first, followed by loan forgiveness or debt relief (49.9%) and access to capital (41.5%).
  • 55.1% of small business owners expect hiring challenges to continue through 2022 and beyond.

While owners relayed anecdotes of unemployment benefits keeping people from applying for jobs, research shows that at the macro level, unemployment insurance benefits have not disincentivized work or caused workers to delay returning to their previous jobs.

Larger companies may be able to respond to workers’ demands by offering higher wages and better benefits as the labor force tightens.

Small businesses, on the other hand, often do not have the resources to compete. While small business owners are optimistic about the future, they now face a “labor pandemic” where they may not financially recover fast enough to meet the growing customer demand.

To address their hiring challenges, small business owners surveyed offered a few suggestions:

  • Improve small business access to financial resources and employee benefits, especially health insurance and childcare.
  • Forgiveness for the PPP loans they received and help to access financing so they can pay higher wages to their employees.
  • Outside options for health insurance and childcare to address those critical employee needs, especially when small businesses can’t afford to offer them.

Dean Swanson is a volunteer Certified SCORE Mentor and former SCORE chapter chairman, district director and regional vice president for the North West Region.