The War On Small Business

Everybody has a pet theory about why it’s so hard for manufacturers and supply chain companies to get the workers they need. Lack of child care, preference for a remote job, continuing fear of COVID–they’re all plausible reasons and each is probably true to some extent.

But to Mike Kinder, CEO of Dallas-based Veryable, which provides a digital platform for sourcing on-demand labor for manufacturing and logistics, they’re also something of a red herring. “I think we’re being led to be distracted by headlines rather than talking about what’s real,” he said. “The last two years have been a full-frontal assault on small businesses, and most manufacturers are small businesses.”

That’s an assertion that’s hard to debate. First there were the lockdowns that designated some businesses as essential and required all the rest to close–and which nakedly favored big businesses. Then came the government relief packages that raised the cost of labor, which also more heavily affected small businesses that can’t readily absorb large labor cost increases. And as those expired, inflation skyrocketed, raising labor costs even further.

Kinder is not alone in his assertions. Carol Roth, a self-styled “recovering investment banker,” is the author of The War on Small Business: How Government Used the Pandemic to Crush the Backbone of America. “The playing field has always been tilted,” she said. “Whether it’s fees and taxes or regulations, those things disproportionately fall on small businesses–especially very small businesses. This was obviously amplified with the decisions about COVID. For example, at the big box pet retail stores, you could get your pet’s nails done and hair groomed­. But you couldn’t do the same for yourself at your local beauty shop–it was shut down. And it was very clear those decisions weren’t data-based. As a result, we’ve lost huge numbers of small businesses that permanently closed. By mid-2020, the number was already in the mid-six-figures, and when it’s all said and done, it’ll probably be a couple of million.”

The effects from that are showing up in our constant shortages of just about everything now. “If you attack one part of the supply chain and say it’s non-essential, the whole chain breaks,” Kinder said. “The game they’ve been playing is a compliance game. You can lose your job or your whole company if you get crosswise with your locality or your state. It’s been a total dogfight.”

But with most federal employee pandemic assistance at an end, and lockdowns being scaled back in those areas of the country where they still remained, now the problem is over, right? Not at all.

“We based this company on a ton of mega-trends we saw coming,” said Kinder. “The skills gap, on-time delivery demands, and technology are just a few. The last two years have been a temporary amplification of problems that have been coming down the pike for a while, and they added to problems. Baby Boomers, for example–say you were still working, but your company was shut down for the pandemic. If you were near retirement, now you just stay out. Your exit was coming soon anyway, and that accelerated it.”

“It’s a huge issue,” added Roth. “The decisions made by governments and the Federal Reserve have disrupted the free market. We could have paid people to stay employed, but we did the opposite. Three million Baby Boomers chose to retire early because of wealth they had on paper. And decisions that have been made on immigration mean there are fewer legal immigrants in our workforce today than in 2020.”

What can manufacturers do to get ahead of the negative trends? Technology is one answer. “Do the work to make sense of tech like IIoT, 3D printing, and Industry 4.0,” said Kinder. “Think about how you innovate properly in mature segments like manufacturing and supply chain. Companies need to ask themselves, ‘What do we need to look like in five years?’ Most can’t answer, but you need that answer to make important decisions today.”

Roth also stressed technology. “Companies should be looking at how they use technology to replace people,” she said. “They have to counter the fears about that. For example, there’s a lot of fear about autonomous trucks, but they could be a great thing if we don’t have enough drivers.” In manufacturing and supply chain, automation usually replaces the most difficult, dangerous and uncomfortable jobs, while also creating higher-tech positions around the new technologies that are added. It’s important industry leaders use those facts to counter the understandable fears of job losses Roth mentioned.

But she also stressed not to neglect the people end of things. “The number one thing companies can do to fix the labor imbalance in the long term is to make it easier to hire people. There are 31.7 million small businesses in the U.S., and only six million have employees, partly because it’s so hard to hire. Look at places that have been overlooked. Second-chancers are one group–there are a number of non-profits working to facilitate the hiring of people who are formerly incarcerated, and in providing education for them. Look at immigration policy and what you can do to get rid of those barriers. For manufacturing and supply chain in particular, talk to your people and learn how you make it easier for them. People have the best ideas but companies don’t always take the time to listen to them. But they can help you attract employees and retain them.”

Of course, companies like Veryable can help too. Interestingly, they’ve done very well through the pandemic. Last summer they raised $31.9 million in a Series A round led by Gigafund. They’ve grown to 20 locations in the South, Midwest, and Western U.S., with goals to expand through most of the country in the next few years. “40% of the working-age population doesn’t have a job,” said Kinder. “But they have time. We want to tap into that resource and help our supply chain companies right-size their headcount.”