Small businesses are scrambling to hire enough workers to meet surging demand.
With consumers flocking back to their pre-pandemic routines quicker than some workers are willing and able to rejoin the workforce, businesses are boosting wages, offering bonuses and stretching the limits of their margins to lock in employees.
There were more than 9.2 million jobs open on the last business day of May, according to the Labor Department, but U.S. employment was still down by 6.8 million from its pre-pandemic level by the end of June. Millions more have yet to return to the labor force after losing their jobs during the pandemic, and it’s unclear how many will come back.
A range of pandemic-related forces, including child or family care responsibilities, health concerns and the cushion of expanded unemployment aid, have limited the pool of workers able to fill a flood of jobs.
The squeeze sent wages higher by 3.6 percent year over year in June overall and by 7.2 percent in the leisure and hospitality industry, where a rush of activity has forced restaurants and bars to fight over scarce workers.
Devin Gong, owner of Copycat Co. and Astoria in Washington, D.C., said his restaurants have been “busier than ever” after scraping through a tough winter thanks in part to government aid. He said that while he was able to retain most of his staff, competition within the industry has prompted “shuffling around” among newly empowered workers.
“Right now, it’s like everybody’s hiring, so the workers really have the upper leg here,” he said.
“Everybody in the company is making great money, way more money than pre-pandemic,” he continued, adding that both of his restaurants have always shared profits among employees.
“But we’re still facing the same issues,” he noted.
The leisure and hospitality industry has been a focal point of the hiring struggles facing small businesses. No industry has lost more jobs to COVID-19 or has added more jobs in the months since states scrapped nearly all pandemic-related capacity and service restrictions.
Anne Marisic, head of marketing at Maine Beer Co., said the brewery and taproom has flourished this summer thanks to a steady stream of vacationers and has been one of few in the area able to hire enough staff.
“We are still having good luck hiring people, but I think we were all sort of surprised by the volume of staff that we needed,” she said. “We had a hint that this was going to happen, but I still think it’s surprising people every day just how busy it’s been.”
But Marisic says Maine Beer Co. pays all employees at least $18 an hour, well above Maine’s minimum wage of $12.15 and almost three times the state’s tipped minimum wage of $7.25.
For businesses with tighter margins used to paying employees less, matching wages like those could prove difficult, particularly amid rising food costs. While the hospitality industry has also been hit hard by labor constraints, similar issues have hindered retailers and manufacturers.
The firms most desperate for employees are the ones most likely to pay the highest wages, said Adam Ozimek, chief economist at Upwork.
“If you have a restaurant and the bare minimum you can open with is 10 people, those 10 people are really really important,” he said. “They’re hiring a worker to get to a survival level of service, so they’re willing and able to pay more.”
For businesses simply looking to increase their capacity, Ozimek said hiring bonuses have exploded in popularity as a way of boosting compensation to navigate a short-term problem with a temporary solution.
“It’s an upfront cost that doesn’t lock you into a longer-term payment structure,” he said.
Google searches for “hiring bonus” have more than doubled since before the pandemic, and many employers are adding additional compensation for workers who meet a certain threshold of hours. Ozimek added that employers are also offering workers more flexibility with scheduling and hours, something Gong said he was also working on with his restaurants.
Even so, it remains to be seen how much longer the power will last for workers — and how soon hiring might ease for small businesses.
The Centers for Disease Control and Prevention on Friday recommended that all schools reopen for in-person education in the upcoming school year, which should free up parents still stuck at home taking care of children. Enhanced federal unemployment benefits also expire in September, but there is insufficient evidence from states who’ve pulled out of the program to know how much of an impact it will make.
“Workers have realized that they have leverage in the economy right now in the short-term. In part because of this rapid, rapid reopening process, they’re able to be choosy,” said Kenan Fikri, head of research at the Economic Innovation Group, a business think tank.
“I think what we’ll start to see over the next six months is whether that leverage is durable and long lasting, or whether it’s kind of fleeting,” he added.