Small business are raising salaries to attract and keep employees, survey finds

Supply chain issues mean small businesses are raising prices, the highest levels since 1979.

The so-called Great Resignation of 2021 is hitting small businesses too. A record number of U.S. small businesses reported that they raised salaries last month in order to attract and retain their employees, according to a report from the National Federation of Independent Business.

Forty-four percent of firms boosted pay, matching the largest share in monthly data back to 1986, according to the NFIB’s November survey.

Those wage increases may begin to pay off. Some 48% of respondents reported having job openings they could not fill, and while still very high, it’s the second straight monthly decline.  Six of 10 small businesses surveyed said they did try to hire in November. Ten percent of owners cited labor costs as their top business problem and 29% said that labor quality was their top business problem.

“Unfilled positions and labor quality remain the biggest challenges for small businere ss owners as they work to get back to pre-crisis levels,” NFIB Chief Economist Bill Dunkelberg said in a statement. “Owners have been increasing compensation to record-high levels to attract the right employees to their business.”

The survey also showed that a quarter of the respondents plan to create new jobs in the next three months, a pullback from the previous month but still extremely elevated.

In other areas of interest, the NFIB survey reported a net 59% of small business owners increased prices of good and services last month. That was the highest figure since 1978. Price hikes were the most frequent in wholesale (88% higher, 0% lower), construction (75% higher, 7% lower), and manufacturing (66% higher, 1% lower). 54% of owners plan price hikes, up three points from October and a 48-year record high reading.

Small and large businesses alike are coping with major shortages of labor and business supplies that emerged during the pandemic. They are paying higher wages and material costs and passing them along to their customers.

Other key findings of the NFIB survey:

  • Owners expecting better business conditions over the next six months decreased one point to a net negative 38%, tied for the 48-year record low reading. This indicator has declined 18 points over the past four months to its lowest reading since November 2012.
  • The net percent of owners raising selling prices increased six points to a net 59% (seasonally adjusted), the highest reading since October 1979.
  • Seasonally adjusted, a net 54% of owners plan price hikes, up three points from October and a 48-year record high reading

As reported in NFIB’s monthly jobs report, small business owners continue to struggle to find workers to fill their open positions. Forty-eight percent of all small business owners reported job openings they could not fill in the current period, down one point from October. Overall, 60% of owners reported hiring or trying to hire in November.

Fifty-five percent of owners reported capital outlays in the last six months, down one point from October. Of those owners making expenditures, 39% reported spending on new equipment, 22% acquired vehicles, and 14% improved or expanded facilities. Six percent of owners acquired new buildings or land for expansion and 13% spent money for new fixtures and furniture. Twenty-seven percent of owners plan capital outlays in the next few months, down four points from October.

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