Roger Geiger: Increased labor, supply costs hurt small businesses

It has been a rough couple of years for Ohio’s small businesses, and owners do not think things are going to turn around any time soon.

When my association, the National Federation of Independent Business, surveyed its Ohio members last month, we found that about 60 percent of them think economic conditions will get worse before they get better.

Perhaps the biggest issue facing Main Street businesses right now is inflation. When we asked our Ohio members, nearly half listed inflation as the biggest issue affecting their family businesses.

Inflation is not a new problem. The entire world has been wrestling with it since the summer of 2021, but it has been especially hard on small businesses.

Unlike big corporations, small businesses are not sitting on piles of cash. When the price of everything from raw materials to shipping pallets to shopping bags goes up, small businesses cannot afford to absorb the additional costs. They really have no choice but to pass those increases on to their customers, which is one of the factors that has led to the worst inflation we have seen in decades.

Over 73 percent of the Ohio businesses surveyed by NFIB reported raising prices in the past three months. Nearly one-quarter of them had to raise prices by more than 10 percent.

The No. 2 problem affecting Ohio’s small businesses — and the prices they charge their customers — is labor.

The survey said 47 percent of owners had positions they could not fill in the past three months because they did not get enough qualified candidates.

Small businesses are trying to attract more job applicants by offering higher wages. Half of the owners surveyed have increased wages in the past three months, and half expect to pay more in the first quarter of 2023. They do not want to, but employers often have little choice but to raise prices a little more to make up for paying workers more.

Of course, these problems are not unique to Ohio.

The latest NFIB Small Business Optimism Index shows that Main Street businesses across the country are dealing with the same issues in similar ways.

That means owners are putting expansion plans on hold, holding onto aging equipment if they can, and doing everything they can to provide the same level of service with fewer employees.

Inflation and supply chain disruptions are global issues, but labor, by and large, is local, and it is worth pointing out that only 15 percent of the Ohio small business owners surveyed need workers with college or advanced degrees. Over three-quarters are not hiring for any position that requires a degree.

Ohio small businesses’ reliance on non-degreed workers underscores the need to reform the state’s education system. We need to put a greater emphasis on preparing people for technical and skilled trades and break down the barriers workers face in the state licensure process.

There are plenty of opportunities to earn a great living without a degree in Ohio. NFIB looks forward to working with the Ohio Legislature and the DeWine administration in the coming year to increase opportunities for more Ohioans to do just that.

Roger Geiger is the National Federation of Independent Business executive director for Ohio. His column does not necessarily reflect the opinion of The Lima News editorial board or AIM Media, owner of The Lima News.