At long last, the unemployment rate finally seems to be improving. According to the latest numbers from the Labor Department, unemployment fell below 6 percent in September, the first time the rate has dropped below this threshold in more than six years.
However, economic experts say there's more to this number than meets the eye, as the labor force participation rate has fallen to historic lows, with many people having given up the employment hunt for the time being.
This has exacerbated the difficulties small business owners have had attracting employees that are the most qualified to fill open positions. BenefitsPro reported last month that entrepreneurs who run small businesses are finding it increasingly difficult to compete with large employers in a number of ways, including wages, employee benefits, job perks and recruiting resources.
All comes down to the almighty dollar
From a standpoint of pay, large employers often have the upper hand, being able to spend more for labor than small employers because they usually have more capital. BenefitsPro noted from a government wages report that employers in the private sector at the end of 2013 spent about $29.65 per hour on average per worker for earnings.
Because employees are naturally interested in making more money, they often look to other opportunities where they can make more. A LegalShield poll from earlier this year found that among small business employees between 18 and 34 years of age, nearly 62 percent had looked for a new job last year, BenefitsPro noted. When asked why they were looking for an alternative to what they were currently doing, the majority said it was for remuneration reasons.
Employee benefits can also be a complicating factor, Benefits Pro pointed out. Typically, small businesses aren't able to provide health care to their staff members, mainly for the same reasons that they can't devote a lot to wages – limited resources. And even when small business owners can make them available, they typically aren't as wide ranging as those offered by large firms.
A separate survey from staffing firm Robert Half recently came to similar conclusions regarding why good employees quit their jobs. Among employees, close to 40 percent of respondents said that inadequate salary and benefits was the main justification for giving their two weeks' notice to their bosses.
Paul McDonald, Robert Half senior executive, noted that to a certain extent, the improving unemployment rate is working against small business owners.
"The stronger hiring climate today means employees who don't feel well compensated may be more willing to look for a new, better-paying job," said McDonald.
To paraphrase an age-old saying, the best defense against losing quality workers is a good offense. McDonald advised managers to regularly benchmark their company's salaries against competitors in their region. Depending on whether small business owners' pay is commensurate with the average, above or below, the appropriate measures should be taken in order to retain top-tier talent.
McDonald also recommended that managers make sure their employees have opportunities for advancement. While salary is important, earnings alone won't prevent workers from pursuing other opportunities, like the ability to earn a more prestigious role or job title.
