While much attention goes to monthly job reports, labor availability is being replaced by quality as a top concern for small businesses. The National Federation of Independent Business (NFIB), an industry group for small business, reported that 17% of small business owners’ plan to fill open positions in the next three months. They also expect to pay more for talent, with 40% reported raising compensation and an additional 21% planning to raise compensation in the next three months.
However, the same survey found labor quality was small businesses’ top concern, with nearly a quarter of surveyed firms reporting problems, surpassing inflation at 23% and labor cost at just 9%. This trend makes sense as elevated quit-rates have taken a blender to the workforce, often not creating good-fits in the process and creating an unwelcome tailwind for low US employee engagement rates.
Nearly 100 million workers have changed jobs since the pandemic, taxing systems like HR and onboarding while workplaces undergo rapid disruption. Merely paying more for talent is an ineffectual shift and does little to solve labor quality concerns that are likely to be a medium term symptom of the current labor market.
Ken’s Take Away: Focusing on boosting retention through streamlined hiring processes (this is a growing painpoint for white collar employees), onboarding improvements, and identifying sources of immediate hire-to-overwork, are likely to see a higher ROI than raising compensation alone to attract relatively mobile talent. Alternatively, as early-career labor markets cool down and AI vendors proliferate, a combination of new talent and tech could offer a way to ease internal pressures on top talent while bootstrapping innovation.
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