America’s small businesses are losing workers.

“From the time we reopened to the time we closed, I was able to hire three people, which was full-time recruiting,” he said.

Reed is far from alone. Small business owners across the United States are facing a severe labor shortage today, which experts warn has reached crisis levels.

“It’s never been harder for small business owners to hire,” said NIB Chief Economist Bill Dunkelberg.

While the current job market poses challenges to employers of all types, small businesses have less ammunition in the battle for talent and lack access to the cash flow, credit and economies of scale that larger companies enjoy. That makes it difficult for them to offer things like competitive wages or sign-on bonuses.

“It’s true that the big box stores are paying more,” said Harry Holzer, a professor of public policy at Georgetown University.

That puts mom-and-pop businesses in a tough spot. “If you’re operating on tight margins, you probably can’t raise wages to attract more workers,” Holzer said.

Inflation is a small-biz “double whammy.”

Suzanne Sarich founded Suzy Cakes in 2006 and grew it to a chain of 26 bakeries, most of them in California. But her head count has dropped from nearly 500 before the outbreak to just 200 now – and rebuilding those levels has become harder and harder.

“We have increased the hourly wage to 20% [but] The cost of living is off the charts,” she said. “Some are commuting over an hour and a half each way, and add in the cost of gas, and how does the math work?” she said.

To deal with the problem, her bakeries are closed two days a week and open shorter hours. She’s also trimmed down her product offerings, including dropping customer favorites like Iced Sugar Cookies based on favorite family recipes.

“The demand was there, but we didn’t have the people, so we had to quickly switch to a reduced workforce model. For us, that means fewer days, fewer hours a day and fewer products,” she said. Her income has dropped by 15 percent from before the pandemic.

According to Eric Groves, CEO of Alignable, an online platform for small businesses, owners are taking it seriously, with higher inflation both driving up costs and driving up sales as consumers become more cautious.

“We’re seeing this double whammy,” he said. “It’s very difficult to find people, and costs are increasing.”

A recent Lignable survey found that only about a third of small businesses are. They are earning 90% or more of their income before the pandemic, Groves said. That’s worse than the results of the same survey last year, when 42% said 90% had recovered or More Their pre-pandemic business.

“Sometimes they have to call what hours they’re open,” Groves said. “It’s the constant pressure of low income, the high costs and the challenges of just trying to get to the other side.”

Workers are still in the driver’s seat — for now

There is a combination of things that small business owners are dealing with when trying to increase headcount.

“People of the right age are not out there looking for work,” said David Dollar, a senior fellow at the Brookings Institution.

There are several reasons behind this, according to economists: a persistent shortage of care workers, low immigration rates and fears of the pandemic.

“A lot depends on whether people are confident that we have Covid under control?” Dollar said.

Edward Fox owns two commercial banking franchises with locations in Wichita, Kansas and Nashville. When the Nashville-based sole employee quits in late 2020, he spent six months searching in vain before closing the office. As a result, he said, he sacrificed $200,000 to $300,000.

“We were hoping that the job market would bounce back, that more people would apply… but man, it’s been a struggle,” he said.

Fox’s ability to raise wages has been limited as Covid has crippled its business, killing many of its sales deals. It’s about 75% of the business. With no one on the ground in Nashville, it made it hard to recapture that revenue. “I think everybody is looking for the same labor pool, and it’s tough,” he said.

Big success from small-business losses

“It’s a shame to see them go out of business. You don’t want the retail sector to get any bigger,” Holzer said.

With empty storefronts a fixture on high streets across the country, shoppers will have fewer choices about where to spend their money, and workers will have fewer places to look for work.

“Anytime you lose a job, it reduces the overall health of the local labor market,” Holzer said. “It’s good for workers to have the same choice as consumers.”