How Small Business Owners Are Dealing With Worker Shortages, Inflation and Supply Chain Delays

Survey Context and Sentiment Shift

• Goldman Sachs launched the "10,000 Small Businesses Voices" initiative in April 2020 to amplify small business input in federal, state, and local policymaking.
• Prior data indicated a systemic lack of representation: only 9% of owners felt they had a strong voice in policy, and just 7% believed federal officials prioritized small business issues over large corporations.
• Small businesses were virtually absent from political discourse, appearing in only 2 out of 14 presidential and vice-presidential debates during the 2020 election cycle.
• A recent September survey reveals a 29-point drop in optimism compared to June: sentiment that the U.S. is moving in the right direction fell from 67% to 38%.
• This decline is attributed to three primary drivers: the Delta variant's impact on consumer-facing sectors, accelerating inflation, and persistent workforce shortages.

Inflation and Supply Chain Disruptions

• 81% of small businesses report increased inflationary pressures since June, with 84% experiencing rising operating costs.
• 74% of respondents state that inflation has negatively impacted their financial health.
• Specific price volatility was cited by restaurant owners: avocado costs surged from $40 to $85 per case within weeks before stabilizing at $60, still significantly higher than pre-pandemic levels.
• Supply chain delays are doubling project timelines for construction firms, with pre-engineered metal building delivery times extending from 12–15 weeks to 25–52 weeks.
• Manufacturers are increasingly refusing to guarantee prices or delivery dates due to the unpredictability of the supply chain.
• Port congestion involves tens of thousands of containers stuck in the distribution cycle due to labor shortages, lack of containers, and trucking deficits.
• Business owners note that shortages span diverse categories, including to-go containers, plastic cups, crab meat, and steel, preventing operations from running at full capacity.

Workforce Challenges and Wage Inflation

• While 73% of businesses are hiring, 87% report difficulty recruiting qualified candidates.
• 80% of owners indicate that hiring difficulties are directly impacting their bottom lines.
• 64% of businesses report that workforce challenges have worsened compared to pre-pandemic levels.
• Staffing shortages are driving substantial wage inflation; one contractor reported losing an employee to a competitor offering a 40% higher wage.
• Restaurant owners have increased hourly rates by $2 to $3 per hour, yet still face high turnover and difficulty retaining experienced cooks and dishwashers.
• Connie's Chicken and Waffles spends 2.5 to 3 hours daily on staffing, a significant increase from the 30–40 minutes required pre-pandemic, resulting in a workforce reduced to roughly 75–80% of pre-COVID levels.
• Mental health issues are affecting 49% of small business owners and employees, rising to 70% for female owners under age 45 due to childcare and pandemic-related stress.

Disparities Facing Black-Owned Businesses

• Black-owned businesses are experiencing a lagging recovery in staffing: median employees dropped from 9 pre-COVID to 6, whereas the overall sample recovered to near pre-pandemic levels.
• Only 20% of Black business owners are very confident in their ability to access capital, compared to 31% of the overall sample.
• 51% of Black business owners hold less than three months of cash reserves, surpassing the 44% figure for the general small business population.
• 54% of Black business owners anticipate needing to take out a loan or line of credit in the coming months, nearly double the 29% rate of the overall population.

Forward-Looking Statements and Policy Recommendations

• Construction executives warn that supply chain constraints are projected to persist for another 12 months, necessitating major detrimental adjustments to business planning.
• Restaurant owners express concern regarding winter spikes in infection rates, which historically reduce sales during the November–February period.
• Goldman Sachs advocates for a durable, long-term, low-interest fixed loan program to replace the expiring COVID EIDL initiative.
• The 10,000 Small Businesses Voices initiative is pushing for federal procurement reforms to reverse a 38% decade-long decline in small businesses contracting with the federal government.
• New data from the EIDL program now utilizes 2019 financials for qualification rather than 2020 data, which reflects pandemic-era losses.
• The EIDL program has recently been modified to raise the loan cap from $500,000 to $2 million with added flexibility for capital usage.
• Approximately half of the relief funds appropriated by Congress remain on the sidelines at state and local levels, prompting calls for faster dispersion.