Half of U.S. mom-and-pop businesses handed out raises during the Omicron labor shortage

February 4, 2022, 3:25 PM UTC

Half of all small-business owners gave raises to employees in January, the highest number in 48 years, fueled by the Omicron variant slamming the labor market.

An additional 27% of small businesses plan to raise worker compensation within the next three months, according to a Thursday survey from business advocacy group the National Federation of Independent Business.

“Small-business owners are managing the reality that the number of job openings exceeds the number of unemployed workers, producing a tight labor market and adding pressure on wage levels,” NFIB chief economist Bill Dunkelberg said in a statement. “Reports of owners raising compensation continue at record-high levels to attract applicants to their open positions.”

The findings show the struggle for small businesses to attract employees because of the tight labor market. During the pandemic, they have trailed the recovery of large companies that can afford to offer more attractive benefits packages to entice potential hires and pay for human resources teams.

Adding to the difficulty for small business is the greater likelihood that their potential recruits are unvaccinated, which often means they’re barred from working in the service industry, and that some working parents are having trouble finding care for their children because in-person classes have been canceled—that means they can’t come into work. 

Also, workers in small businesses like restaurants or service employees are more likely to have to interact with customers in person. Many workers might be afraid to return to the front lines, especially as the highly contagious Omicron rages. 

Among small-business owners, 11% cited the rising cost of attracting employees as their top business problem, also a 48-year record high. Nearly half of all small-business owners reported having job openings they could not fill, even with higher wages.

Department of Labor data shows that the Great Resignation, a popular term for the huge numbers of people who have left their jobs over the past six months, is largely a problem for small and medium-size businesses. Employees leaving their jobs has been more concentrated on Main Street than elsewhere. 

The new jobs report released by the Department of Labor Friday morning showed that the U.S. added almost half a million new jobs in December, crushing expectations. Still, small businesses are suffering.

One particularly vexing problem for small businesses is the vicious cycle that is caused by their frequent lack of a large financial cushion. They can’t pay higher wages unless they make more money, but they can’t make more money without employees.

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