We’ve talked before about how 2017 was a great year for the US labor market. The unemployment rate dipped to 4.1% in October (an 18-year record low), and 2.1 million jobs were added over the course of the year. These positive trends appear to be continuing in 2018. In January 2018, average wage growth increased to 2.9% year over year, up from 2.5% in December, a positive sign for job seekers and employed workers alike.
Now, we’re taking a closer look at the year’s effect on SMBs—including unique patterns in the SMB sector and the challenges these businesses face. While the labor shifts of individual SMBs may seem unimportant compared to changes seen by American mega-employers, SMBs in fact make up 99.7% of all employer firms in the US.
By examining the labor patterns of SMBs, we can learn valuable information about the US labor market and economy at large. We partnered with the NSBA (National Small Business Association) on their annual survey of SMBs to parse out the factors that affected SMBs in 2017 and how those factors are influencing the labor market today.
Our report with the NSBA found that small and medium-sized businesses experienced notable changes in 2017, most of which will come as good news to job seekers.
- 30% of SMBs filled new positions in 2017, up from 25% in 2016 (this excludes employees hired into vacated positions).
- 52% of SMBs raised wages in 2017, compared to just 50% one year prior.
- 40% of SMBs raised wages by more than 3%—an increase that exceeds the national average wage growth*.
- 38% of SMBs didn’t raise or lower wages, but instead kept their wages consistent in 2017.
Issues Facing SMBs
Many of the issues facing small and medium-sized businesses are mirrored throughout the labor market at large, as a result of low unemployment. 26% of the firms surveyed in our report said that finding qualified candidates is an impediment to growing their business. Perhaps to combat this challenge, some businesses are beginning to loosen their job requirements.
- 15% of firms said that despite keeping their wages consistent in 2017, they began requiring fewer credentials for their open jobs and hiring more junior employees.
- Only 42% of the firms surveyed said they prefer job candidates with bachelor’s degrees.
With the tightening of the labor market and the rise of New Collar jobs, it’s unsurprising that some employers reported loosening their job requirements. This is good news for job seekers, who may now be able to compete for higher-paid, senior positions.
SMBs are Driving Employee Advancement
Despite the challenges facing SMBs, our data shows that these businesses offer valuable career advancement opportunities to their employees, which in turn strengthens the American labor market.
- 89% of small businesses offer some type of on-the-job learning for employees, and 74% offer access to formalized training.
- 85% of small businesses with over 5 full-time employees offer an opportunity for promotion, and 91% with over 20 full-time employees offer an opportunity for promotion.
Small businesses might offer these opportunities for a range of reasons, prime among them to retain top employees longer. Our data shows that companies that don’t offer training or promotions are twice as likely to have an average employee tenure of under 2 years compared to companies that offer both of these opportunities.
In 2017, several factors dictated the labor market shifts experienced by SMBs. The tightening of the labor market and the rise of New Collar workers seems to have created more SMB career opportunities for job seekers in most industries. What’s more, a significant percentage of SMBs are raising wages for workers at a rate that exceeds the national average for wage growth. Plus, despite a difficult hiring landscape, SMBs are continuing to offer training and promotion opportunities.
All these facts seem to signal that SMBs truly value hiring great employees at fair wages and providing them the resources they need to grow and learn. In their effort to retain their best workers, SMBs are creating a better labor market for job seekers everywhere. These patterns seen in SMBs will hopefully steer all companies towards offering top salaries and benefits to their employees.
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