Labor shortages top the 2018 list of small business concerns

Dive Brief:

In a report from the National Federation of Independent Business (NFIB), 22% of small-business owners cited the shortage of qualified workers as their top business concern. The small-business membership organization randomly collected responses from 10,000 of its members in January.
Small-business job creation was strong in 2018, NFIB chief economist William Dunkelberg said in a statement. Industries with the biggest hiring goals include manufacturing, construction, professional and communication services, and transportation.
At 24%, the share of respondents seeking to solve labor shortages by raising compensation is at its highest in the survey since 1989, NFIB said. An additional 31% specifically plan to increase compensation in order to attract and retain talent.

Dive Insight:

Finding qualified workers in today's tight labor market is a challenge for all businesses. Though middle market firms experienced steady job growth in 2017, according to a report from the National Center for the Middle Market (NCMM), the rate of hiring is slowing down. The middle market's 5% employment growth rate in Q4 2017 is the lowest since Q3 2016.

The manufacturing and construction industries have the most job openings to fill. Deloitte predicts that 3.5 million manufacturing jobs will open up over the next 10 years, but 2 million of those may not be filled. For positions that are hard to fill because the required skills are hard to find, employers might need to invest in training, since a growing number of manufacturing jobs require tech skills, including robotics and cybersecurity.

Similarly, construction has had trouble finding talent with specialized skills, such as carpentry. The industry lost 40% of its workforce, or 2.3 million people, between 2006 and 2011. Employers in the industry might have to change their hiring strategies, which besides paying premium wages means looking for workers in other markets, cutting operating expenses as much as possible, and investing in training or apprenticeship programs.

Benefits and compensation are the most obvious tools for attracting and retaining talent, but the expense they create can prove to be excessive for small businesses. And for those that do have a benefits plan, it's wise to ensure they're not overpaying to maintain it.