More government support for small businesses? That’s what some members of Congress would like — and what so many small businesses across the country need, according to our recent survey.
That additional federal funding would come on top of the roughly $1 trillion that the federal government disbursed to small businesses over the last two years through the Paycheck Protection Program (PPP) and the expanded Economic Injury Disaster Loan (EIDL) program. According to the Small Business Administration, 90 percent of the total value of PPP loans has been forgiven — just over $700 billion worth of assistance. This federal relief was a crucial lifeline to millions of small businesses.
For most, however, the pandemic’s effects continue to burden efforts towards recovery and growth. As one small business owner told us, “small businesses are far from out of the woods.”
One of the biggest challenges facing them right now is finding and keeping workers. A recent report from the Bipartisan Policy Center, done in collaboration with Goldman Sachs 10,000 Small Businesses Voices, examines this and other key small business challenges. It lays out options for policymakers in how to address them. If Congress and the Biden administration want to provide more support to small businesses, they should focus on the most acute challenges.
Right now, finding workers is at the top of the list.
In January, a national survey of small business owners by Goldman Sachs 10,000 Small Business Voices revealed that 87 percent of those who were hiring found it difficult to recruit qualified employees. Among those with hiring difficulties, nearly all (97 percent) said it was affecting their bottom line. That represented a 17-point jump in just a few months.
These findings are borne out in the Census Bureau’s Small Business Pulse Survey. Since August, 40 percent of small businesses have consistently cited “identify and hire new employees” as their top need.
Hiring is just one step. Small businesses need to get on the radar of potential employees. They need to put together an attractive employment package that includes benefits. And, once hired, they need to be able to retain them (if it’s working out, of course). At each of these points, small businesses often have trouble competing with larger companies.
“I cannot financially afford to compete with the starting salaries and benefits packages that big businesses can provide,” one small business owner said. This is an evergreen challenge but one that has worsened today.
Small businesses know how to compete for talent. They know that retirement plans and training opportunities can be as enticing to potential employees as salary — and they want to reward their workers for their efforts. They need more, and better, support for doing so.
Additional support from policymakers could certainly come in the form of more financial assistance, but there are other impactful ways to help small business owners as well. In our report, we identify steps policymakers can take to help with small businesses’ hiring challenges.
First, Congress should consider renewing the employee retention credit. The credit, created in response to COVID-19, was popular but underutilized. That was partly due to restrictions around its use with PPP loans. But it was also due to administrative complexity and uncertainty. Many small businesses had received advanced payment or planned to claim the credit for the fourth quarter of 2021. Yet the credit was ended early, in September.
Two bipartisan bills have been introduced to extend the credit through the end of 2021. Lawmakers should also consider a new incentive, either a renewed employee retention credit or something similar, targeted at small businesses.
Second, Congress should consider ways to enhance small businesses’ ability to offer benefits such as retirement plans. Just 52 percent of workers at the smallest companies (those with fewer than 50 employees) have access to a retirement plan through their employer. This is not for lack of desire on the part of business owners. Respondents in the 10,000 Small Businesses Voices national survey say retirement plans are often too expensive and administratively burdensome for them to provide.
Our report offers many more ideas for policymakers to consider. Addressing the biggest small business crunch right now — hiring and retention — is a good place to start.
Joe Wall is managing director of Goldman Sachs 10,000 Small Businesses Voices. Dane Stangler is director of strategic initiatives at the Bipartisan Policy Center.