Business

How Hand-outs Hurt Small Businesses

This past year has posed many challenges for small businesses nationwide. Closures, lockdowns, social distancing, plexiglass, etc. all introduced challenges for business owners to work around.

If your doors weren’t closed and bills going unpaid, you were struggling to change the way you conducted everyday business to meet the demands of local officials and abate customer fear.

How Hand-outs Hurt Small Businesses

The biggest challenge from the onset of the lockdown was delivering a product or service to the customer. With so many mandates to work around, ranging in severity from one state to another, businesses were spending more money to meet compliance requirements at a time when less money was coming in.

Now that more and more businesses are fully open, the new challenge is getting workers to fill available positions. When the government is awarding employees more money to stay at home, employers are finding people don’t want to work.

Remote Access

Conferencing tools and SaaS software for small businesses were absolute musts for surviving the transition to remote working. Many will continue in popularity given the added benefit of saving money on transportation for meetings and commuting.

In-office staff may alternate days to maintain social distancing requirements. But, as offices open up again and more staff are needed, finding qualified candidates is a challenge.

A recent survey by Small Business Trends indicated 54% of businesses are having trouble filling positions because of the increase in unemployment benefits.

Take Tina, for example, who was earning upwards of $70,000 as a bartender in NYC when the pandemic hit. She relocated to Florida and continued to collect the higher unemployment benefits offered by the state of New York. Also she has been earning $800 week for the past fifteen months.

She was also provided a debit card preloaded with $300/month to use on food.

If you add these kinds of perks to the occasional stimulus check, many are just awaiting the next hand-out.

Employees like Tina are being “trained” by the government to expect living wages. When the income for staying home exceeds the incoming for putting in an eight-hour workday, the choice is very simple for most people. In fact, it will be more difficult for people like her to transition back to working again.

In the case of many businesses, when employees require more money to fill the same positions, businesses will have to choose between filling positions with illegal immigrants or turning to automation to replace them entirely. The consequences for businesses in the long run are severe and will hinder industry growth across many sectors.

When faced with empty positions and unable to satisfy customer demand, employers need to increase the salary offered for the position to entice qualified individuals to apply. Likewise, anyone deciding not to return to work for the same wage is holding out for a higher paying position before making any career decisions.

Striving for Normalcy

Over 80% of businesses are now fully operational. The availability of vaccines to the entire population has restored both employee and consumer confidence in returning to normal activities. Yet, many businesses are reporting that unqualified workers are applying for job positions.

PPP loans have helped some businesses hire staff, pay overhead, and recuperate some of their losses resulting from closures. But just around the corner linger concerns inflation will have on business growth.

The printing of money to support the unemployed and closed businesses lowered the dollar value and drives up inflation rates. Many businesses have not returned to their normal monthly income. In the face of adversity, most expect growth to slow while the cost of operating increases.

Most small businesses are happy to forget the challenges of 2020 but are not quite out of the woods with adversity as we face new dilemmas in 2021.

About the author

Alena Sham