Easing Wage Growth: A Silver Lining for Small Businesses

The American small business landscape is on the brink of a significant shift. As wage growth begins to slow down, small businesses, which have long struggled to compete with larger corporations in attracting talent, may find themselves in a more advantageous position.

Over the past few years, the labor market has been exceptionally competitive, making it challenging for small businesses to match the salaries offered by their larger counterparts. Holly Wade, the executive director of NFIB’s research center, notes that many small businesses have missed sales opportunities due to understaffing.

As of September 2023, businesses with one to nine employees accounted for around 21% of all job openings, a 20% increase from the previous year, indicating their eagerness to hire. This surge in job openings reflects the readiness of small businesses to capitalize on market opportunities, albeit hindered by their struggle to fill these openings. In comparison, job openings in larger firms have seen a contraction.

The year 2023 witnessed a near-record high in applications for employee identification numbers, second only to 2021. The COVID-19 pandemic was a critical factor during this period, leading to many businesses closing down and sparking a wave of new small businesses, particularly in sectors like meal and drink delivery.

The slowing wage growth could herald a new era of prosperity for small businesses. The Bureau of Labor Statistics reported a mere 0.2% wage growth in September 2023 from the previous month and a 4.2% annual increase. This deceleration in wage increases might not only open up more opportunities for small businesses to attract talent but could also play a role in easing inflation, which has significantly impacted cash-strapped small enterprises.

The current economic climate, marked by slowing wage growth, presents a potential boon for small businesses. This shift could enable them to attract and hire talent more effectively, potentially sparking a new wave of growth and opportunity in the small business sector.