[Senate Hearing 117-327]
[From the U.S. Government Publishing Office]
S. Hrg. 117-327
THE SMALL BUSINESS WORKFORCE CHALLENGE:
CAUSES, IMPACTS, AND SOLUTIONS
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HEARING
BEFORE THE
COMMITTEE ON SMALL BUSINESS
AND ENTREPRENEURSHIP
OF THE
UNITED STATES SENATE
ONE HUNDRED SEVENTEENTH CONGRESS
SECOND SESSION
__________
JUNE 8, 2022
__________
Printed for the Committee on Small Business and Entrepreneurship
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Available on: http://www.govinfo.gov
__________
U.S. GOVERNMENT PUBLISHING OFFICE
48-247 WASHINGTON : 2022
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COMMITTEE ON SMALL BUSINESS AND ENTREPRENEURSHIP
ONE HUNDRED SEVENTEENTH CONGRESS
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BENJAMIN L. CARDIN, Maryland, Chairman
RAND PAUL, Kentucky, Ranking Member
MARIA CANTWELL, Washington MARCO RUBIO, Florida
JEANNE SHAHEEN, New Hampshire JAMES E. RISCH, Idaho
EDWARD J. MARKEY, Massachusetts TIM SCOTT, South Carolina
CORY A. BOOKER, New Jersey JONI ERNST, Iowa
CHRISTOPHER A. COONS, Delaware JAMES M. INHOFE, Oklahoma
MAZIE HIRONO, Hawaii TODD YOUNG, Indiana
TAMMY DUCKWORTH, Illinois JOHN KENNEDY, Louisiana
JACKY ROSEN, Nevada JOSH HAWLEY, Missouri
JOHN HICKENLOOPER, Colorado ROGER MARSHALL, Kansas
Sean Moore, Democratic Staff Director
William Henderson, Republican Staff Director
C O N T E N T S
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Opening Statements
Page
Cardin, Hon. Benjamin L., Chairman, a U.S. Senator from Maryland. 1
Paul, Hon. Rand, Ranking Member, a U.S. Senator from Kentucky.... 3
Witnesses
Goger, Dr. Annelies, Ph.D., Fellow, The Brookings Institution,
Washington, DC................................................. 4
Greszler, Ms. Rachel, Senior Research Fellow, The Heritage
Foundation, Washington, DC..................................... 14
Arensmeyer, Mr. John, Founder and CEO, Small Business Majority,
Washington, DC................................................. 34
Faulkender, Hon. Michael, Ph.D., Dean's Professor of Finance,
University of Maryland, Visting Fellow, America First Policy
Institute, College Park, MD.................................... 42
Alphabetical Listing and Appendix Material Submitted
Arensmeyer, Mr. John
Testimony.................................................... 34
Prepared statement........................................... 36
Responses to questions submitted by Senator Hirono........... 69
Cardin, Hon. Benjamin L.
Opening statement............................................ 1
Crosby, Mr. Phillip, CEO, Dan-O's Seasonings
Statement dated June 8, 2022................................. 65
Faulkender, Hon. Michael
Testimony.................................................... 42
Prepared statement........................................... 45
Goger, Dr. Annelies
Testimony.................................................... 4
Prepared statement........................................... 7
Greszler, Ms. Rachel
Testimony.................................................... 14
Prepared statement........................................... 16
Response to question submitted by Senator Risch.............. 67
Paul, Hon. Rand
Opening statement............................................ 3
Risch, Senator James
Statement dated June 8, 2022................................. 64
THE SMALL BUSINESS
WORKFORCE CHALLENGE:
CAUSES, IMPACTS, AND SOLUTIONS
----------
WEDNESDAY, JUNE 8, 2022
United States Senate,
Committee on Small Business
and Entrepreneurship,
Washington, DC.
The Committee met, pursuant to notice, at 2:29 p.m., in
Room 428A, Russell Senate Office Building, Hon. Benjamin L.
Cardin, Chairman of the Committee, presiding.
Present: Senators Cardin, Cantwell, Booker, Coons, Hirono,
Rosen, Hickenlooper, Paul, Ernst, Inhofe, Hawley, and Marshall.
OPENING STATEMENT OF HON. BENJAMIN L. CARDIN, CHAIRMAN, A U.S.
SENATOR FROM MARYLAND
Chairman Cardin. The Senate Small Business and
Entrepreneurship Committee will come to order.
I want to welcome our witnesses today and thank you for
your participation. As is the custom of our Committee, your
entire statements will be made part of the record and when you
are recognized you may proceed. We ask that you try to
summarize your statements in about five minutes.
Today's hearing will examine the workforce challenge that
our Nation is facing, especially with regards to how it is
holding back the prosperity and growth of America's small
businesses. Small businesses employ nearly half of America's
private sector workforce, and they are the driving force of
innovation and growth in our economy. However, the deck is
stacked against them in the competition for strong workers
because they lack the resources and capital to offer wages and
benefits that compete with larger companies, they have limited
access to training and apprenticeship programs, and they often
require in-person work at a time when many workers want
flexibility.
These historical challenges have been made worse by what
economists are calling the Great Reshuffle. In February of this
year, for example, 4.4 million workers quit their jobs, but
more than half of those workers went on to find better jobs or
an entirely different field of work.
Small businesses are not only facing difficulties in
attracting workers, but they also struggle to keep them, which
is a further draw on the finite amount of time and capital that
small business owners have. A study conducted by the U.S.
Chamber Foundation found that high employee turnover cost small
businesses as much as $3 billion per year. Those are resources
that could be put into growth and innovation to boost our
economy. If small businesses cannot find the workers they need,
they cannot grow. According to Goldman Sachs' 10,000 Small
Businesses Voices report, 97 percent of survey respondents
reported that the difficulty hiring was affecting their bottom
line, a 17-point increase from September 2021.
Congress has a duty to our small businesses to support them
as they confront these challenges because our economy can only
go as far as our small businesses can take us. So our goal
today is to explore the causes of these workforce challenges,
the effects of these challenges, and solutions such as
investing in workforce training, leveling the playing field
between larger companies and small businesses regarding
benefits employees receive, and increasing the size of our
workforce.
Unlocking the potential of the current workforce through
job training is one way to help meet the needs of small
businesses. As we know, a four-year degree is not a requirement
for every career path and there are many highly skilled
occupations that are better served by an apprenticeship or
similar model. There is already a model for these kinds of
partnerships, and many community colleges in Maryland,
including Prince Georges Community College, have earned a
national reputation for their apprenticeship programs. However,
these programs can be difficult for small businesses to access,
so we must take a hard look at how to connect these programs to
small businesses.
President Biden's American Rescue Plan also provides a
model for how the Federal Government can work with state and
local governments to deliver job training resources to the
communities that need it the most. In Baltimore, for example,
the city will invest $3.8 million in ARPA funds to provide
critical workforce development training to residents, including
summer jobs for young people and occupational training in high
demand fields.
For a small business to grow, we must level the playing
field between larger companies and small businesses regarding
benefits offered such as paid leave. In Maryland, Democrats in
the Maryland General Assembly recently passed legislation to
provide 12 weeks of job-protected paid leave to the employees
of any organization with more than 15 employees. The law
requires the State to establish an insurance program funded by
contributions from employers and employees, including sole
proprietors. The program will allow workers to take 12 weeks of
paid leave for any family or medical emergency and could help
small businesses compete with larger companies for employees.
As a former Speaker of the House in Maryland, I know that
our statehouses nationwide are the laboratories of democracy. I
will be following the implementation of this law closely, and I
am hopeful that it could serve as a model for how the Federal
Government can assist small businesses to combat these
workforce challenges.
We must also assess how we can increase the overall size of
our workforce through innovative policies. Unfortunately, due
to the Trump administration's immigration policies, we now have
some catching up to do. Between 2016 and 2020, annual
immigration to the United States was cut in half, which robbed
our economy of more than 2 million additional workers today had
immigration kept pace with the 2016 levels.
The effects of our immigration labor shortages are acutely
felt on Maryland's Eastern Shore, which is reliant on workers
for the H-2B visa programs during busy crabbing season. The
prolonged H-2B visa shortage does not only threaten individual
businesses but entire communities in my home state. By
evaluating how to empower immigrants to participate in the
workforce, Congress can make it easier for small businesses to
find workers and easier for workers to immigrate to America.
We can also increase the size of our workforce by investing
in returning citizens. Nearly 600,000 Americans are released
from prison annually, and despite evidence showing that they
make excellent, loyal employees, they are often not included in
the workforce development policies and programs that can equip
them with the skills they need to succeed in the workforce.
Investing in training returning citizens would not only help
provide stable employment opportunities for them but also help
small businesses looking for workers.
If the COVID-19 pandemic has taught us anything, it is
this: The problems that small businesses face are difficult but
not intractable. And addressing them will take focused,
intentional, and concerted effort, but they are not
insurmountable. The pandemic also confirmed that solving these
challenges requires a multifaceted approach because there is no
single solution.
So I am looking forward to hearing more from our witnesses
about steps Congress can take to address all aspects of our
Nation's workforce challenges to unleash the growth potential
of small businesses and the immediate and long-term needs.
With that, I recognize my distinguished Ranking Member for
his opening comments, Senator Paul.
OPENING STATEMENT OF HON. RAND PAUL, A U.S. SENATOR FROM
KENTUCKY
Senator Paul. Small businesses are struggling under the
heavy burden of regulation and taxes. For the last several
years, government policies at the Federal, state, and local
levels have subjected our Main Street businesses to restriction
after restriction. These onerous regulations, coupled with $6
trillion in government spending, have thrown the economy into a
freefall.
First, it was the lockdowns. Government forced small
businesses to close indefinitely. Then, when they were finally
allowed to reopen, they were saddled with capacity
restrictions, mask mandates, and vaccine requirements for
customers. While these government dictates did nothing to
change the trajectory of the virus, they forcibly closed nearly
10 million small businesses, many permanently.
The government's so-called solutions did not stop at public
health. Congress doled out trillions of dollars in taxpayer
money, the Fed ran the printer 24-7, and government paid people
who decided they did not want to work nearly $800 billion from
March 2020 to July 2021. It should be no surprise to anybody
that labor force participation is at its lowest point since the
Carter administration.
Despite countless warnings, government, Congress, poured
even more gasoline on the fire. Even economists like Larry
Summers and Jason Furman, who worked for Democrat
administrations, agree President Biden's $1.9 trillion so--
called Rescue Plan was too large and has caused the rampant
inflation we are now encountering.
Only now, Treasury Secretary Janet Yellen, who refuses to
testify before this Committee, admits she was wrong in calling
inflation a small and manageable problem. If she had not been
deliberately blind to the predictable result of unrestrained,
reckless spending, we might have avoided the economic pain the
Biden administration inflicted on every American family.
And to add insult to injury, President Biden's anti-
domestic energy policies have created five to seven dollars per
gallon gas prices, which have roughly doubled since he took
office.
No matter how many times the Biden administration blames
the War in Ukraine or so-called greedy corporations, the truth
remains; inflation comes from the Federal Reserve creating
money to buy the exploding U.S. debt.
One would think, in the face of such profound failure,
politicians in Washington would show some humility. One would
think they would consider the possibility they do not know
economics better than economists or business better than the
small business owners of America. Maybe, just maybe, problems
created by excessive government spending and intervention
cannot be solved by more government spending and intervention.
We cannot look to the same people who created this problem for
a solution.
Those who think small businesses are telling us they want
more government spending on ineffective Federal job training
programs are not paying attention. What small businesses need
is freedom. The free enterprise system has created more wealth
and prosperity than any government program ever could. Let us
let small business owners do what they do best without
government getting in the way.
Chairman Cardin. Thank you, Senator Paul.
We will now go to our witnesses. We will start with Dr.
Annelies Goger, who is a fellow at the Brookings Metropolitan
Policy Program at Brookings Institution. Her work as a fellow
involves researching and developing policy solutions to
increase economic opportunities and decrease work inequality.
Since 2019, Dr. Goger has focused heavily on researching ways
to reform unemployment.
I am informed that you are a recent new resident of
Maryland, and that is the reason you are going first.
STATEMENT OF DR. ANNELIES GOGER, Ph.D., FELLOW, THE BROOKINGS
INSTITUTION, WASHINGTON, DC
Dr. Goger. Thank you, Chairman Senator Cardin and Ranking
Member Senator Paul and members of the Committee.
It is an honor to testify before you today about the
challenges facing small businesses. My name is Annelies Goger,
and I am a fellow at Brookings Metro, and my specialty is in
U.S. workforce policy, inclusive economic development, and
global supply chains.
This is also a personal topic for me because my father is a
small business owner. He owns a lightning rod installation
company with two or three employees, and he has consistently
struggled to find and retain quality talent. I believe my
father could have really benefited from more management
training on how to more effectively manage his teams and reach
out to pools of talent that he could not find.
But for the last 30 or 40 years we have had a very lean
approach to supporting small business ecosystems. And this, in
a normal time, looks like a Darwinian survival of the fittest,
but in the pandemic it quickly devolved into a Squid Games
scenario. And the carnage was all around us.
The temporary relief that was provided helped avoid some of
the worst effects of this carnage and helped to prevent this
from cascading into the rest of the economy. But today, small
businesses, as you have both noted, really face major
challenges with workforce as a massive pain point, and I
believe we need to do more to think about how we can support a
vital ecosystem.
So what is causing this pain? I would argue that it is
actually a complex perfect storm of factors, some of which were
pandemic-related, but some are actually longer-term trends. The
pandemic trends including immigration, lack of child care--
actually, 256,000 Americans of prime working age passed away
from COVID, so there are those workers that we unfortunately no
longer have. Also, the reallocation that happened as things
like hospitality completely collapsed and then there was
massive growth in things like warehousing, that reallocation of
workers and matching employers, there is a lot of friction
there, and it takes a lot of time to resolve.
But there are also much more long-term shifts which include
demographic shifts such as an aging workforce. The pandemic
actually accelerated the retirement of many Baby Boomers, and
the younger generation of workers is not only a smaller pool,
but it is a much more diverse pool. Historically, we have
underinvested in Black and Latino or Hispanic talent, and they
have had less access to quality jobs and higher education.
In addition, the Digital Age is going to create an ongoing
need to keep people fresh, not just workers but also managers
and manager training, and this is really costly for employers
to bear as well.
So what should we do about this? I think in the short term
expanding immigration and including work visas, but also
helping employers understand like extension services, to help
them understand how they can reach talent that is on the
sidelines, like the long-term unemployed, people with
disabilities, people who were formerly incarcerated. That is
something we can do.
But I think in the long run we need to think about three
things. One, employers in the Digital Age need to shift from
being just consumers of talent to also co-producers of talent.
So we have done some studies in my previous job on incentives
to small and medium-size and large businesses to train their
workers where they would be reimbursed for their training. What
we found was that there is a sweet spot for medium-size in
particular, 18 to 100, where investing in their training and
subsidizing that leads to greater revenue and greater
employment, but for small businesses they were actually harmed
by these subsidies.
And so I believe we also need to think about things like
pooling costs and sharing training costs, which happens in some
of the most mature systems where you have applied training.
Finally, I think we really do need to expand that management
and supervisory training and manufacturing extension to many
more industries, such as the service sector.
Number two, we need to rethink our talent model from
programs--we have 43 across 9 Federal agencies, often
duplicating efforts--to more of a systems approach. A systems
approach is what small businesses can participate and act part
of. They cannot create their own bespoke training programs.
They just cannot afford it. Things like apprenticeships happen
in a system in countries that do it the best.
And finally, diversity inclusion is not about charity. If
we fail to engage the talent, our diverse talent that makes up
not just workers but also entrepreneurs, if we fail to get them
off the sidelines and into our economy, we will fail to
innovate, we will fail to have regions that are vital, and
moreover, we will fail to really have an ``American Dream'' in
this country anymore, where there is a level playing field for
people that do not have wealth to access it.
My father is approaching 70, next fall, and he has confided
in me that he does not think he can retire fully. He has never
had--for most of his adult life, he has not had health
insurance even though he stands on roofs all day.
I think really if we are going to think about creating the
vibrant ecosystem that we need in this country to compete with
China and other countries we need to think more about creating
that level playing field and investing in our diverse talent.
Thank you very much.
[The prepared statement of Dr. Goger follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Chairman Cardin. Thank you for your testimony.
Our next witness is Rachel Greszler. She is a senior
research fellow at Heritage Foundation, focusing on retirement
and labor policies such as Social Security, disability
insurance, pensions, and worker's compensation. Her work
focuses on policies that promote economic growth, individual
freedom, and well-being.
Before joining Heritage in 2013, Ms. Greszler was a senior
economist on the staff of the Joint Economic Committee of the
Congress. That is a good pedigree, coming from Congress.
Glad to hear from you.
STATEMENT OF RACHEL GRESZLER, SENIOR RESEARCH FELLOW, THE
HERITAGE FOUNDATION, WASHINGTON, DC
Ms. Greszler. Thank you. Thank you for the opportunity to
be here today.
Small businesses continue to struggle to find workers who
are willing to work and who have the skills that they need. In
fact, employers listed labor quality as their single most
important problem every month between 2018 and 2021, with the
exception of March and April 2020 with the COVID shutdowns.
These struggles have gotten worse since the labor shortage. The
current 11.4 million job openings equates to 1.9 jobs available
for everyone that is looking for work.
And yet, small businesses now say that inflation has become
an even bigger problem than their workforce struggles, with 32
percent of small business owners reporting inflation is their
single biggest problem. That compares to 3 percent in January
2021. Forty-year high inflation has created many struggles for
businesses. Surging input costs means that contracts come in
over budget, sometimes even at a loss. Employers have to
increase workers' pay to keep up with rising consumer costs and
to compete in a labor force that is now 3.2 million below its
pre-pandemic rate.
But this creates an inflationary cycle. When businesses
have to pay workers more to do the exact same thing, they have
to raise their prices. In April alone, 70 percent of businesses
said that they increased their pay or they plan to increase it
at the same time that 63 percent of businesses increased their
prices. Higher wages have not made workers better off, though.
The median worker has experienced a $3,300 wage increase
over the past year, but inflation has eaten away that entire
gain and actually left them $1,600 poorer.
So what is driving inflation? The Federal Government's
policies. Inflation is too many dollars chasing too few goods,
and the Federal Government has simultaneously pumped trillions
of dollars into the economy while restricting the supply of
goods and services through policies that discourage or outright
prohibit work. The Federal Government spent 45 percent more in
both 2020 and 2021 than it did in 2019, and all of this is
deficit-financed. About half of it came from the Federal
Reserve printing money.
The money supply has increased more over the past two years
than it did over the prior ten.
Most problematic was the $1.9 trillion American Rescue
Plan, and it was enacted well after the recovery was underway
and which included less than 10 percent going toward actual
public health. The bulk of the American Rescue Plan was welfare
expansions that exacerbated the labor shortage, private union
bailouts that incentivized reckless behavior, giveaways to
state and local governments that were already abundant in
revenues, and $1,400 stimulus checks that fueled the inflation
that has since eaten away their entire value.
The Administration's proposed solutions to spend more and
produce less are backward. Things like forgiving college loan
debts owed by the most affluent Americans, enacting a child
care entitlement that would drive up costs and crowd out
providers, and taxing away the output and the innovation of the
most productive parts of our economy will lead to something
that is even worse than inflation; we will have stagflation.
Moreover, when it comes to the unprecedented worker
shortage and the workforce skill gaps, the government is the
problem and not the solution. The government has effectively
put up road blocks on all of the most efficient roadways to a
more productive and robust economy and, instead, is directing
traffic onto a congested toll road.
Ongoing welfare without work benefits, including Obamacare
expansions and SNAP expansions, are continuing to discourage
work, particularly among young people.
And, Federal COVID-19 vaccine mandates have made the health
care workforce shortage especially pronounced, even life
threatening, with health care employment lagging total
employment by 263,000 jobs just since the mandates went into
effect.
Higher education subsidies and the Administration's
cancellation of thriving new apprenticeship programs are
preventing people from pursuing lower cost and higher quality
education, and Federal job training programs have been
failures. The WIA program is supposed to provide training for
in-demand careers, but a gold-standard study found that only
one out of three participants found jobs in their field of
training.
Politicians and bureaucrats cannot know businesses' needs
better than employers themselves, so they should stop diverting
people into programs that waste their time and taxpayers' money
when private sector employers can, and are, providing more
effective education and training.
While the temptation for policymakers is always to do
something, the best solution to fighting inflation and
improving the workforce is to interfere less. Instead of
building an expensive new highway, policymakers should simply
remove the road blocks that are preventing people from getting
where they need to go in the shortest time and at the lowest
cost.
Thank you.
[The prepared statement of Ms. Greszler follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Chairman Cardin. Thank you very much for your testimony.
Our next witness is John Arensmeyer, who is well known in
our Committee, a frequent visitor. He is the founder and CEO of
the Small Business Majority, a national organization focused on
uplifting small businesses across the country while ensuring a
diverse and inclusive economy. He works with the Small Business
Administration and has led to the organization providing
resources to 30 million small businesses and entrepreneurs. He
previously testified in front of Congress and has worked
alongside the White House to solve issues facing small
businesses and the economy.
Glad to hear from you.
STATEMENT OF JOHN ARENSMEYER, FOUNDER AND CEO, SMALL BUSINESS
MAJORITY, WASHINGTON, DC
Mr. Arensmeyer. Thank you, Chairman Cardin, Ranking Member
Paul, and members of the Committee.
I founded the Small Business Majority 16 years ago to
empower America's diverse entrepreneurs to build a thriving and
equitable economy. We have a network of over 85,000 small
businesses and 1,500 partners or partner organizations we work
with. Before founding the Small Business Majority, I was the
founder and CEO of ACI Interactive, an award-winning
interactive communications company. So I have had a front row
seat for challenges and workforce challenges faced by small
businesses.
The ``Great Resignation'' has spawned record numbers of new
businesses, which is great. However, it has exacerbated
workforce challenges. Small business owners have overwhelmingly
cited labor shortages as one of the most significant challenges
they face. According to a recent survey from Goldman Sachs, 87
percent of small firms report difficulties filling open
positions. Our own polling has revealed that more than half of
small business owners reported being negatively impacted by
workforce shortages.
Small businesses are doing what they can to address these
problems. According to our polling, small businesses have taken
measures to create more incentives for workers, such as
increasing pay, increasing benefits, creating more part-time
positions, and hiring younger staff. However, as emergency
financial assistance has expired and additional support remains
stymied by partisan politics, small firms await the resources
they need to sustain a long-term recovery.
A leading workforce barrier faced by small businesses is
the ability to offer quality, affordable benefits commensurate
with those offered by large firms. Since 2014, the Affordable
Care Act has been an essential component of the small business
ecosystem. Indeed, more than half of the ACA market
participants are small business owners, small business
employees, and self-employed Americans.
The American Rescue Plan has helped to fill the coverage
gap by expanded tax credits. However, if Congress fails to
extend these benefits, those who work in small businesses will
find it difficult to maintain health care coverage commensurate
with that offered by large firms.
Similarly, many small businesses do not have the resources
to offer paid leave benefits the way large companies do and are
looking to the Federal Government to step in with the kind of
paid leave programs that exist in every other developed country
in the world.
Likewise, access to quality, affordable child care is
essential if we are to address workforce instability. Women, in
particular, have been forced out of the labor pool due to lack
of access to affordable child care during the pandemic. More
than one-third of small business owners with children reported
that a lack of access to affordable, high quality child care
was a barrier to starting their businesses and hiring
employees. Congress must expand tax credits for child care
expenses that would allow working parents to receive a
percentage of child care expenses as a tax refund.
The pandemic has highlighted the importance of wealth
building including saving for retirement. Unfortunately, many
small businesses do not have the resources or the
administrative capability to offer retirement benefits. We must
expand State Secure Choice Savings Programs that provide an
easy on-ramp for employees to save for retirement while
ensuring that self-employed individuals have access.
I also want to touch on two essential workforce pools that
are underutilized. The first is immigrants. Immigrants are
highly entrepreneurial, launching small businesses at over
twice the rate of native-born Americans. Moreover, throughout
our history, immigrants have filled essential labor needs. We
must pass comprehensive immigration reform. Alongside that, we
must expand H-1B visa programs to allow more visas for skilled
and low-skilled foreign workers while decreasing the waiting
period for rejected applicants.
Also, justice-impacted individuals that the Chairman
referenced, second-chance hiring opens an enormous untapped
talent pool for small employers. Research has shown, and
anecdotal evidence in our own network, that most employers
hiring justice-impacted individuals have positive experiences
and notably lower turnover rates. Some of the tools and
resources needed include occupation licensing reform,
implementing clean slate procedures, and creating materials
that will educate small businesses on the benefits of second-
chance hiring.
Finally, as has been discussed here, we must invest more in
helping small businesses access the resources they need to
train a skilled workforce. An example of this is the Lifelong
Learning and Training Account Act that was reintroduced earlier
this year.
To conclude, more than two years into the pandemic, small
businesses are slowly rebuilding, but they need a vibrant,
stable workforce to fully recover.
I look forward to your comments and questions.
[The prepared statement of Mr. Arensmeyer follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Chairman Cardin. Thank you very much for your testimony.
Our final witness is Dr. Michael Faulkender, who is the
Dean's Professor of Finance at the Robert H. Smith School of
Business. He joined the University of Maryland in 2008.
And I am sure everybody here knows University of Maryland
is the home of the national champion men's lacrosse undefeated
season. You all knew that.
Senator Hirono. Hanging on the edge of my seat.
Chairman Cardin. It was never in doubt.
Dr. Faulkender left that role at the beginning of 2019 to
serve as the Assistant Secretary of Economic Policy at the U.S.
Department of Treasury. During the COVID-19 pandemic, he
assisted in negotiating the CARES Act and was the senior
Treasury official who led to the implementation of the Paycheck
Protection Program, and I remember being in rooms with our
witness as we were trying to implement this program.
STATEMENT OF HON. MICHAEL FAULKENDER, Ph.D., DEAN'S PROFESSOR
OF FINANCE, UNIVERSITY OF MARYLAND, VISITING FELLOW, AMERICA
FIRST POLICY INSTITUTE, COLLEGE PARK, MD
Dr. Faulkender. Thank you, Chairman Cardin, Ranking Member
Paul, and Senators on the Committee. Thank you for the
opportunity to speak with you today on the challenges America's
small businesses are confronting as they look to meet their
workforce needs.
As the Chairman said, I am a finance professor at the
University of Maryland. I also serve on the Advisory Board of
the Maryland Small Business Development Center, and I am a
visiting fellow at the America First Policy Institute.
During the Trump administration, I had the honor of serving
as the Assistant Secretary for Economic Policy at the
Department of Treasury. In that role, I worked very closely
with this Committee and the Small Business Administration to
quickly implement the Paycheck Protection Program. As a result
of our exceptionally strong partnership, the unemployment rate
peaked at just 14.7 percent in April 2020. My co-authors and I
estimate that the first round of PPP likely saved as many as 17
million Americans from the unemployment rolls.
The situation today, however, is very different from the
depths of the pandemic. The current challenges confronting our
economy are largely the result of overstimulation, particularly
the American Rescue Plan. Excessive Federal spending has buoyed
consumer demand, which has resulted in businesses struggling to
find enough American workers to meet that demand. Absent
sufficient supply, prices are rising at a pace not seen in 40
years. According to the National Federation of Independent
Business' April 2022 report, ``32 percent of small business
owners report inflation is their single most important problem
in operating their business, the highest reading since the
fourth quarter of 1980.'' While the Federal Reserve has
belatedly started raising interest rates to curb inflation,
policymakers must also focus on ways that we can increase the
supply of available workers.
To be clear, the pace of jobs recovery from the depths of
the pandemic has been impressive. Largely as a result of
vaccines generated by the Trump administration's Operation Warp
Speed, we have already recovered more than 96 percent of the 22
million jobs lost from the pandemic recession. For context, it
took more than six years to fully recover the jobs lost during
the 2008 financial crisis.
That said, we are still 822,000 jobs short of where
unemployment was in February 2020 even though our population
has grown by nearly 4 million. While the unemployment rate is
low, labor force participation is still more than 1 percent
below pre-pandemic levels.
At the same time, households are flush with cash due to the
$4.6 trillion in total COVID resources authorized by Congress.
With all of that cash boosting demand, the employment needs of
our Nation's businesses have expanded.
The result is more than 11.4 million job openings at the
end of April, just below the record set in March. Today, there
are nearly two job openings for every one unemployed person.
America's small businesses are struggling to fully serve
their customers' needs. According to data from ADP, while large
and medium-size enterprise continue to grow, employment at
firms of fewer than 50 employees has declined this year.
Looking at the April survey of small business owners, ``59
percent reported hiring or trying to hire in April'' and ``93
percent of those reported few or no qualified applicants for
the positions they were trying to fill.''
The fundamental problem is that we have a labor shortage.
Our focus should be on implementing policies that will bolster
supply, including increasing the size of the domestic labor
force across the skills distribution.
First, we must stop providing prime-age, able-bodied adults
excessive amounts of cash payments and social services detached
from work requirements. The Biden administration has proposed
eliminating work requirements from eligibility for child tax
credits and has opposed recent state-requested Medicaid waivers
that have work requirements. Recent work authored by
researchers at the University of Chicago examined the child tax
credit proposal and estimates that ``this change in policy
would lead to 1.5 million workers to exit the labor force.''
Second, we should reduce the regulations associated with
obtaining the training and experience that workers need. The
U.S. Chamber of Commerce Foundation estimates that, quote,
small businesses pay on average $11,700 per year per employee
in regulatory costs, and the costs of regulation to small
businesses with 50 employees or less are nearly 20 percent
higher than for the average firm, end quote.
Examples to include these--examples to reduce these
regulations include ensuring that the Department of Labor does
not micromanage apprenticeship programs and by eliminating the
excessive occupational licensing requirements that many states
have imposed. Further interference by the Federal Government is
not the solution. There are already too many overlapping state
and Federal job training programs that do not provide the
skills employers are looking for.
Third, we should re-examine the work disincentives in
Social Security. While retirement age has risen over time from
65 to nearly 67, but early benefits start at age 62, those
benefits are subject to reduction if people work. For example,
somebody age 64 who has started taking benefits but makes
$30,000 from working would see their Social Security benefit
reduced by more than $5,000. The current Social Security
structure tends to discourage Americans from continuing to work
at a time that our labor force is too small.
Finally, our immigration system should be more skills--and
merit-based. The current high-skilled visa program needs to be
reformed so that we are selecting those that possess the
highest skills needed to grow our economy.
I look forward to participating in this important
conversation. Thank you.
[The prepared statement of Dr. Faulkender follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Chairman Cardin. Again, we thank all four of our witnesses.
We will now start five minute rounds.
Before the pandemic, we had hearings in this Committee, and
the challenges for small businesses getting trained workers was
one of the top three issues mentioned as concerns for small
businesses and growth. So we had a significant challenge for
small businesses getting quality, trained workers.
When we created the Paycheck Protection Program, during the
early parts of COVID-19, one of the main objectives was to
allow small companies to be able to maintain their workforce
because we knew if they had to lay them off it would be more
challenging to bring that workforce back because small
businesses would be, again, at a disadvantage at getting the
most trained workers. So we recognized this issue.
Now the pandemic has made it worse. The labor shortage
today has made it much worse. I will give you one example,
though, in regards to government programs.
We have surveys from the National Restaurant Association
about the challenges restaurants are having in being able to
attract workers with the current labor market and the cost of
labor. And those that received the Restaurant Revitalization
funds are in a position where they can keep their workforce;
they can get the workers. Those who did not receive it are
having a much more difficult time competing, just mentioning
the fact that there is an affordability issue here in addition
to finding trained workers.
But several of you mentioned that small businesses do not
really have the capacity to be able to have a training program.
They do not have that. You have to have a shared effort.
We have lots of training programs at the national level. I
am familiar with some of the apprenticeship programs, but it is
difficult for a small business to get engaged in an
apprenticeship program. If you are a large company, you have a
much easier time connecting with those that have the
apprenticeship programs.
So, Dr. Goger, let me start with you. How can we tailor
these training programs so that small businesses can really be
engaged as they partner to be able to get a trained worker to
meet their needs?
Dr. Goger. That is a great question, Senator Cardin. The
issue, like I said, is that we have programs and not systems,
and so that means if you look at the gold standard places,
where these earn-and-learn ecosystems work well, you have a
clear role of the education provider that takes some of that
training burden off the employer. You have a clear role often
of an intermediary that helps connect the learner and the
employer. Right? And then you have employers that have a clear
role, which is to engage in a longer-term strategy of training
a professional. Right?
So we often treat apprenticeships like they are these
bespoke programs. And the issue with that is like if I ask my
dad, why don't you start an apprenticeship, which I have, the
answer is, well, in lightning rods, he does not have a
curricula for that. He does not have a registration--he cannot
access that registration process. It is super cumbersome for
him.
What if we had a mechanism where all the other lightning
rod providers could get together and work with educators to
build that competency-based pathway and then he participates in
that? On the job, he trains to that structured pathway. They
all agree, and periodically they reassess that process. It
takes the burden of creating that whole thing from scratch off
of his shoulders.
And in the long run, once it is all set up--you have an up
front investment, a public sector investment. But in places
like Switzerland, employers get an 8 to 11 percent return on
investment, and that is because some of those heavier costs
around who does the educating and all that, that is not on the
small business' shoulders.
So I think that business model is really critical to
thinking about, and I also think the cumbersome nature of our
registration process--you know, we do not have connections
between apprenticeships, CTE, community colleges. These are all
separate silos instead of a unified system that employers can
engage in.
Chairman Cardin. Mr. Arensmeyer, let me ask you, what would
you like to see Congress do to make it easier for small
businesses to be able to access training programs to be able to
get trained workers?
Mr. Arensmeyer. Well, I think Dr. Goger said, and the
literature all shows, that these programs, they work well when
you are dealing with big companies. But like everything else in
the small business world, small businesses do not have the
capability to navigate, you know, complicated bureaucracies.
They do not have the time to independently pursue, whether it
is connections with community colleges, directly with training
programs, and they need--we need to consolidate these programs,
and we need to improve the education and information that is
provided to small businesses about how to access these
programs.
I think sometimes the programs are--you know, if they are
sort of looking to get the biggest numbers of impact, they are
going to go to a big business. They are going to be able to
deal with one HR department, and they are going to be able to
get those numbers. But that does not solve the problem of the
many small businesses out there, so I think it is a question of
streamlining a system and making it accessible to small
businesses.
Chairman Cardin. Thank you.
Senator Paul.
Senator Paul. I am going to reserve my time and pass it
down to another member on my side, if I could.
Chairman Cardin. Certainly. That would be? I think it is
Senator Inhofe.
Senator Inhofe. It is. Okay. Thank you, Mr. Chairman.
There is no state that is more dependent upon the issues
that are brought in this Committee hearing, and this is the
reason I got on it in the first place. I hear regularly from
small businesses in Oklahoma because we have got a lot of them.
Their margins are shrinking, and I think we can speculate as to
why, and it is pretty obvious.
In April, inflation was up 8.3 percent, and the average
American family is spending an extra $569 every month just to
buy basic necessities. And on top of this, businesses
everywhere are raising wages and offering more benefits simply
to survive in the labor market, but it is still not enough.
So, Ms. Greszler? Is that right?
Ms. Greszler. Correct.
Senator Inhofe. Yes, I would like to have you--right now,
we are undergoing this multi-trillion-dollar spending spree,
and the effects that has on small businesses is debatable. You
touched on this in your opening statement, but I would like to
have you elaborate as you wish.
Ms. Greszler. Yes. So the spending spree has resulted in
one out of every three dollars that is in circulation today
having been printed by the government. That has massively
expanded the amount of demand in the economy, and at the same
time, we had welfare without work benefits that were
restricting the supply of workers. And so it just created this
huge gap. As a result of that, businesses cannot get the
workers, and they are in this inflationary cycle here.
We have to stop the spending immediately. That is one of
the first things, and then I think we get toward the longer
term goals because workforce has been an issue for years and we
have, in many ways, a broken higher education market.
Senator Inhofe. Yes. The spending is something I wanted to
get to because that is something that is not talked about as
much.
And I would say to Dr. Faulkender, very similarly--and you
touched on this in your opening remarks, but . . . how can this
Administration advocate policies--obviously, they are not doing
it right now--that would help level the playing field for small
businesses?
Dr. Faulkender. Thank you, Senator. I think some of the
most important things that we can do is reduce, as was stated,
some of the spending but also some of the regulation that is
being imposed on small businesses. Organizations that are
operating at smaller scale, but nevertheless have the same
regulatory requirements, have fewer workers to spread those
costs over. It makes it more expensive per worker, and as a
result, we are seeing that small businesses are struggling more
than others to retain workers. Likewise, as the Chairman
mentioned, larger businesses have greater ease in providing
telework, for instance, for their employees. And so anything we
can do to make the environment for small businesses more
competitive by reducing some of the costs that we impose upon
them and some of the threats of higher taxation that we are
imposing upon them would be beneficial to assist the small
businesses.
More than anything, we need to increase the number of
workers in the workforce. There just are not enough people that
are looking for jobs relative to the number of openings right
now, and so reducing the disincentives of being part of the
workforce, I think, is the singular most important thing that
we can do to help fill those employment gaps.
Senator Inhofe. It is kind of interesting because I am
older than any of you guys are and I can remember it was not
that long ago when we thought we would love to have a problem
like this someday. And now it is here, and we are not so sure
about it.
But I think it needs to be said over and over again by
knowledgeable people, such as we have here today, on this
overspending, overregulation, the damage that is being done,
and I appreciate your witnessing.
Thank you, Mr. Chairman.
Chairman Cardin. Senator Hickenlooper.
Senator Hickenlooper. Thank you, Mr. Chair, and I
appreciate this importance of having someone on the panel who
has a family experience with lightning rods because I think it
is fair to say that Senator Paul sometimes acts as a lightning
rod and has frequently said that I act as a lightning rod. So I
think it is appropriate in some important way.
I was in Colorado last week and met with a group of
students in one of our mountain towns to discuss the success of
a program I started when I was Governor, called CareerWise,
which is an apprenticeship program. And one of the students,
his name was Brandon--and he had worked for the previous three
years as he was working his way through high school, with a
construction company, and he had actually decided he was going
to go to college. He was not going to, but now he was going to
go to college, but he was going to continue working for the
construction company. He is a project supervisor at the age of
19. Anyway, he is going to continue to work for them as he goes
through a degree in architecture.
He made a challenge to us. He said, what are you going to
do to make sure every kid has a chance to get meaningful work
experience while they are still in school, before they actually
go out and get a job? So his challenge was: What are you going
to do to get every kid this opportunity?
So what more can the Federal Government--Dr. Goger, I will
start with you. What more can the Federal Government do to pair
small businesses and younger Americans with these kind of
experiential learning opportunities?
Dr. Goger. That is a great question, Senator Hickenlooper,
and really we need to start much younger. We need to start in
K-12. We should be taking 11-year-olds to meet mentors because
information asymmetries about what you can do in your job are
huge. People do not know.
Jasmine Hill, a professor at UCLA, she calls it mobility
knowledge. They do not know what the options are. There are so
many well-paying jobs that are not being filled purely because
people do not have someone in their family that works there and
therefore can tell them how to access it. Right?
So as the first in my family to go to college, there was a
lot of that mobility knowledge that I did not have, and I think
we need to be taking a more proactive role going into schools
and in K-12 curricula starting early with opportunities to get
work experience. Right?
Our average apprenticeship age is 26. We should be thinking
about 16. That is where our young talent really is.
And I think one of the things--if you want to get to
specifics, one of the things that we really need to think about
is guidance counselors and teachers. What do they know about
the career opportunities available to young people? A lot of
times, you know, be a lawyer, be a doctor, go to college. That
is pretty much all people here, but I think there is a lot more
options for the two-thirds of Americans that do not end up with
a college degree.
Second, we need some permanent funding streams for
intermediaries that do that connection, like CareerWise,
between the young person, the employer, and that can provide
some support. Let us say the young person needs transportation.
That is the connector that we do not have permanent funding
for.
Three, we need funding for related instruction. Right? So
if you are going to have someone learning that in the class,
ideally, you have some time in the classroom and some time on
the job. It is a structured program.
In the classroom, you learn--you know, if it is an
electrical program, you learn the theories around like nodes of
electricity. Right? But on the job you figure out how to
actually solve the problem. And that is where the soft skills
get built. That is where someone builds that professional
network.
So I think that we need to really make sure that we are
structuring the incentives in K-12 and community colleges so
that education itself is creating multiple pathways for people
and not just a college-for-all solution because you said an
apprenticeship does not have to be a choice between a degree or
not. In Alabama, they actually created the nation's first
master's degree apprenticeship in social work in an HBCU.
Senator Hickenlooper. Yes. And I agree with that
completely. There does not have to be that match.
I think it is also worth looking at how do we keep this
skills learning going throughout a person's life. Kids of all
ages are going to have to keep learning things.
You know, a woman in Colorado started a company called
Guild Education that now is that interface between--some of her
customers are Starbucks and Walmart, where every single
employee, when they want to pick up any packet of learning
skills, the company will support them, and then Guild is the
intermediary that allows them to make sure they get the right
class and they finish it.
If I can just get 30 seconds, I wanted to ask a little bit
just about the visa application process, Mr. Arensmeyer, just
because I see so much of this workforce. I mean, if we had a
streamlined visa process, I think that could go a long way in a
lot of these places where we have real workforce--I was a small
businessperson myself, so I am painfully aware of the
importance of this.
Mr. Arensmeyer. That is absolutely true. I mean, some
industries, like the hospitality industry and the construction
industry rely on heavily on foreign-born labor.
And along those lines, it is absolutely true we need to
increase the H-1B visa program for high-skilled workers, but we
need to expand it to low-skilled as well. Talking to small
business owners across the country, they are lacking workers at
every level.
Senator Hickenlooper. Right.
Mr. Arensmeyer. As I said, construction, hospitality, and
other industries. So you know, we have grown our economy over
the decades, over the centuries, with foreign-born workers. And
we have constraints on that right now, and we are hearing from
businesses across industries that that is a huge problem. So we
need to, you know, responsibly ease some of those restrictions.
Senator Hickenlooper. Well, maybe the next thing we will
have a hearing on comprehensive immigration reform and work
from that point of view.
Anyway, thank you. I yield back. Thank you for being
concise.
Chairman Cardin. You are ambitious.
Senator Paul.
Senator Paul. I just wanted to interject on the immigration
issue just very quickly.
Senator Hickenlooper. I told you I was a lightning rod.
Senator Paul. Well, here is the thing. We never do anything
on immigration, and the reason is this, is people want the
whole thing done or nothing. If you would break it into small
pieces and look at the H-2A program, the H-2B program, or the
employment-based visa program, there are fixes that both sides
could come together.
But the big thing is there are 20 million people here
illegally. One side wants them to vote; the other side does not
think immediately voting is a great idea if you came here
illegally. That is a big bugaboo, and it has stifled us.
I have a bill that doubles the employment-based visas.
There is 1 through 5. And there is no reason why we should not
be able to get bipartisan support on that and pass the bill.
There are 70,000 employment-based visas, EB-1 through 5. I
believe we ought to double it. I think a lot of Democrats would
support that, but it has not gotten anywhere because everybody
wants everything or nothing.
I have another bill that takes the H-2A program--and the H-
2B are another category; they are capped. But H-2A is
agriculture; it is uncapped. I would take some of the H-2B
workers, put them in the H-2A, the uncapped, which would give
us more workers, and they would now be called H-2A. It would be
mostly like landscape workers, but it would be probably several
hundred thousand landscape workers. You would move them over.
And I think there could be bipartisan support for that, too.
We take the H-2A program and make it work better by making
the government respond to you within a certain amount of days.
It is electronic. If you are bringing back the same workers,
there is less work, and they run through the system much
easier. We make it year-round. All these things are very
practical that there is probably no partisan disagreement on.
Not everybody is going to vote for it, but it is not a
really, really pitched partisan battle. But we do not get to it
because the sticking point is do we let 20 million people vote
or 15 million people vote who came illegally. So I think if we
got to smaller portions of this we might have a chance.
And I will go back to the regular order.
Chairman Cardin. We might differ a little bit the way you
explained it, but I do agree that we----
Senator Paul. I am always right.
[Laughter.]
Chairman Cardin. But I do agree we need to make progress.
Senator Ernst.
Senator Ernst. Thank you very much, Mr. Chair.
And thank you, Senator Paul. ``Bugaboo,'' that is the word
for the day, folks.
But I do want to chime in on some of the thoughts that have
been expressed by our witnesses today and thank you all so
much.
And, Dr. Goger, I am going to agree about a phrase that I
use all the time. It is: You only know what you know. Right? So
we experience this throughout our population. You only know
what you know, and you do need those examples out there.
I am the first in my family to get a four year degree.
My sister has a degree from a community college, and my
brother is--he did not to go to school, and that is probably a
good thing. But he is doing quite well because he had skilled
training in heavy equipment, and he went directly into the
workforce. He works for--he is a union laborer with the
Burlington Northern Santa Fe rail line, and he operates heavy
equipment for them. And out of all the three of us kids, he
probably does the best. So there are just different types of
opportunities for different individuals out there, but you are
right; you only know what you know.
And so to that, Dr. Faulkender, thank you so much for being
here. I would like to say thank you because I do think we need
to get more engagement in the workforce, and finding ways to do
that is extremely important for so many small businesses that
are really struggling. Some of them are closing their doors
because they do not have workers. So we really have to do
something about that.
And Federal apprenticeship and job training programs are--
they exist in abundance, as you pointed out. I have actually
worked for one of those job training programs at a technical
college in South Carolina, but there are so many of them. So
how can we put reforms in place, do a better job of maintaining
those programs, getting the types of skills out there? What
reforms would you recommend?
Dr. Faulkender. I think first and foremost we need to make
them significantly more flexible. You know, one of the things
that I learned during the pandemic in running the Paycheck
Protection Program is that we may think of businesses as
operating a particular way, but when you are then rolling out a
program nationwide you are exposed to the diversity of
businesses out there and the different situations they
confront. And the idea that we can create this one-size-fits-
all and have it work for everybody just does not work if you
start putting lots of constraints in place.
We need to let businesses, states, municipalities have the
flexibility to do it for themselves. And so for instance, when
you have the Department of Labor put a lot of conditions on
apprenticeship programs that then disqualify them from
participation, that is going to make it more difficult for
industries and businesses to find ways that work for them and
their unique circumstances. So let us provide flexibility and
otherwise get out of the way.
Senator Ernst. And I agree 100 percent, and I am going to
tout a program that I visited last week while we were on
recess. I visited the John V. Hanson Career Center in Forest
City, Iowa. It is a career center that is sponsored by the
local community college and four of the high schools and
obviously a very generous employer in the area. It did not take
the Federal Government to come up with this career center, and
it is very focused on the needs of local employers.
And it allows juniors and seniors to go to the career
center during their regular K-12 school time, and they are
learning a trade and earning college credit at the same time
through the community college. And these young men and women,
they can either decide to continue on and transfer credits into
a university, go on to the community college, or some of them
are even being presented with job opportunities from local
employers coming directly out of high school, debt-free, great
paying jobs.
So you know, I always hesitate to say, ``We are from the
Federal Government. We are here to help'' because sometimes we
just need to get out of the way and let those local
decisionmakers, those local thought providers get in there and
discover what is necessary and right for their own community
and drive forward with it, and that is what the John V. Hanson
Center has done.
So I appreciate it. This is a really good discussion today,
so thank you all very much for being here. Thank you.
Chairman Cardin. Senator Rosen.
Senator Rosen. Well, thank you, Chairman Cardin, Ranking
Member Paul. This is a really good hearing.
Workforce challenges, it is what we--we heard this before
the pandemic. We are hearing it during. And now, hopefully, as
we are moving through it, we are going to find some resolve.
I want to say that I agree 110 percent with everyone here
who says we have to get down through K-12. We have to excite
young kids, show them that there is more than three jobs that
they might see on TV or the internet, how they get there and
what the path is for them and really empower those career
counselors and all of those things in each one of our
communities.
And so we have spoken about training and mentoring for
young folks, but we also have to talk about upskilling or
reskilling our returning workforce, our midlife, perhaps,
workers. And so ``help wanted'' is a sign we have seen in every
window on the doors of small business over the past year. We
hear from companies of every size and who are just facing
unprecedented challenges filling the workforce.
So in Nevada, even though the unemployment rate has
continued to go down, only three in five adults are working or
currently actively seeking work. And so the rest have grown
discouraged. They have dropped out of the labor market, and
quite a few have stayed at home to take care of their families,
maybe children, maybe an aging parent as a caregiver.
And so I felt that we had to create an on-ramp for those
who want to join the workforce at that time, so I introduced
what is called the STEM RESTART Act. It is bipartisan
legislation to help Americans come back through what I am
calling--what we are calling ``returnships.''
So, Dr. Goger and then Dr. Arensmeyer, how do you think we
can create on-ramps for these mid-career workers so we can get
them upskilled or reskilled and return to the workforce and
help them in that way? A little different than our young kids
K-12.
Dr. Goger. Sure. I think that most training that happens,
happens by employers, and we should be incentivizing especially
mid-size employers to train and onboard workers more. When we
did a study in California, we found that 18 to 100 was the
sweet spot, where when you reimburse employers to train, that
increased their revenue and increased their size.
For smaller, though--for smaller employers, though, I think
we need to think about how you can pool training costs, like
community training centers, incubators, places where people
know where to go when they are looking for that new job and
they do not know where to start. Thank you.
Mr. Arensmeyer. Well, I thank you for your--you know, there
is a whole panoply of things that are in effect here. For women
entering the workforce, child care continues to--maybe they
have stayed home with the kids, the kids are off in school, but
they still are going to need child care. And we hear constantly
from employers that they struggle to keep and recruit women
particularly, caregivers, because of the inability to access
affordable child care. So the provisions in the Build Back
Better Act to really reduce the cost of child care are
absolutely essential.
You know, we have talked about expanding opportunities for
foreign-born workers in the system, justice-impacted returning
citizens in the system. And, quite frankly, if you are
bringing--if you are recruiting someone back into your small
business, you have got to be able to pay the same level of
benefits that a big business will, the competition.
And so it is--you know, sort of the big four areas that we
think are important: health care, pay level, child care, I have
already talked about, and retirement savings. Really
facilitating small businesses being able to offer commensurate
benefits has been just a huge disparity across our system. So
it is really--it is not one thing. It is really putting all of
these together.
Senator Rosen. Thank you. I know I have a few seconds left,
so I just really want to reiterate what we have been talking
about, about apprenticeships also because in Nevada we have
over 90 registered apprenticeships where you earn while you
learn, you graduate debt-free, average salary there about
$70,000. We are trying to bring more apprenticeships. We have
large swaths of openings in cybersecurity and technical
computing, forensics, a lot of those things, trying to bring
more of that registered apprenticeship capacity because we know
that that works.
And I just wanted to, like I said, in the few seconds left
to say how much I agree with that, and I know that you are
supportive of that, and I think it is important that we put our
efforts into this to create a robust workforce.
Thank you, Mr. Chairman.
Chairman Cardin. Senator Paul.
Senator Paul. You know, we have discussed a little bit of
labor force shortages, and you know, I am a Republican who is
for more lawful immigration, so I think that can be part of the
answer.
I do think there are certain aspects of the labor force
shortage, though, that are perplexing. The argument has been
made that the artificial stimulus of government spending and
creation of new money by the Federal Reserve is part of it. It
has created this enormous amount of demand, and that is part of
the labor force shortage. The only problem with that argument
is we still have not got back to the actual physical number of
where we were before the pandemic.
Now the government did really disrupt. We have never had a
$20 trillion economy just closed and then reopened, so there
are enormous dislocations. It is not only ours. Most of the
world closed down and then reopened.
But the other argument is that maybe it is an underuse or
that maybe we have deterred people from work and quantifying
those and making arguments for which is the case, that we have
so much artificial demand that we cannot keep up with the
workers because of the artificial demand versus a labor force
that is not working.
So we have labor force participation that is about 62
percent or so, and people say it is going down. The remaining
38 percent I am interested in. Does that include people that
are disabled or cannot work? Or, when you do labor force
participation--we will start with Ms. Greszler--are those
people able to work, the 38 percent that are not in the labor
force? 62 percent are participating; 38 are not. Who are the 38
percent?
Ms. Greszler. Yes, so it can include those people that are
not in the labor force. Part of that could be disability. Most
of them are able to work.
I have been digging into the numbers and trying to figure
out who is it that is not coming back to the labor force. A
particularly troubling part is that it seems to be the 20- to
24-year-old age group. The drop in employment is actually
bigger than the net drop in employment for all workers. That is
when people should be at their greatest opportunity, like they
have all the potential in the world there. And they are not
attending college in greater degree either. The college
enrollment rates have declined. So that is a particularly
troubling part of it.
A narrative that is out there is that it is mostly women,
especially women with younger children, who have been
disproportionately impacted, and absolutely, child care is a
struggle. I have six young kids and went through COVID, and it
was not easy to work with them, all at home many times.
But there have been some studies, multiple ones, including
by Jason Furman, President Obama's former CEA chair, Claudia
Goldin, and they basically found, yes, it was a struggle, but
women pushed through, and it actually did not cause their
employment to decline. I have been looking at this, and only 16
percent of the current gap in employment is parents with
children. That includes men and women.
And so I do not think that that is the big part there and
we do not need to be enacting a big new entitlement that would
drive up those costs of child care, but there are ways that we
can help child care become more accessible and affordable and
also have the types of jobs that work for women, that work for
caregivers, that work for people at the older end of the age
spectrum, that are particularly appealing to younger workers,
and that is the independent contracting, the freelancing. We
should not be shutting those opportunities out.
Senator Paul. Did you say you have six young children?
Ms. Greszler. Well, 4 to 14, so I consider them all young.
Senator Paul. Six. Yes, my sister has six. She is an OB/
GYN. So I know what it is like to have a working sister with
six also, so that is a big deal.
You know, when you look at this also, one of the things we
talked about was we were quite concerned, at least on our side,
of adding the $600 extra in unemployment. And that expired back
in September, and we thought, well, people will go back to
work. And the worrisome thing is: Did we change behavior so
much that some of them did not go back to work or some of them
are working for cash on the side? Are they taking government
money and working on the side? And you do hear stories of that,
the people who are taking a little bit less from the
government, then they are driving somewhere for cash, you know,
in another city or something and not being reported.
Mr. Faulkender or Dr. Faulkender, your response sort of to
the previous question? Labor shortage in general, getting rid
of the unemployment add-on, and why we still have a shortage.
Dr. Faulkender. Right. So the other significant segment of
missing workers are those in their 60s. So there is an early
retirement that is going on, and this is why potentially some
of the penalties of Social Security should perhaps be revisited
because that is also a significant portion of the missing
segment of the labor force.
The technical answer to your question is we can look at
different segments of the adult population, and prime labor
force participation has mostly come back. It is still only
about a half a percentage point below where it was prior to the
pandemic. It is the older workers. So prime is 25 to 54. It is
above that where we are seeing not a recovery. And so how much
of that is extra concern about COVID versus how much of it is
the savings that they accumulated, the run-up in their
retirement portfolio facilitated them leaving but also some of
the penalties associated with Social Security, associated with
doing--taking Social Security and working at the same time?
Unfortunately, the high levels of inflation we are seeing
may push some of those people back into the labor force, but I
do not think that is what we--I do not think that is why we
want them back in.
Ms. Greszler. If I could just add that eliminating the
retirement earnings test would not cost anything, it is
actually just kind of misperceived tax. You get the money back
later on. So it would actually be pro-growth and improve Social
Security's finances.
Chairman Cardin. Senator Coons.
Senator Coons. Thank you, Chairman Cardin and Ranking
Member Paul. Thank you to our witnesses today.
I have heard from a number of businesses up and down my
home state, the small State of Delaware, that they are indeed
in the middle of a significant labor shortage but also a skill
shortage in that hiring and retaining and motivating folks who
have the appropriate skills for the jobs for which there are
opportunities is a real challenge. So, thank you.
If I could, Dr. Goger, you said in your testimony that
apprenticeships should be easier and cheaper for small
businesses to sponsor. The apprenticeship model is well known
in the building trades and other well-established industries,
but my former governor, Jack Markell, launched and ran a
statewide program to help create registered apprenticeships in
high-growth, high-potential sectors, really driven by employers
in partnership with our community college.
What barriers do small businesses face in managing a
registered apprenticeship program, and do you think government
investment in apprenticeships can actually help alleviate this
issue?
Dr. Goger. That is a great question. The challenge for a
lot of small businesses--because, as I said earlier, we have a
program approach that essentially requires an employer to
create a bespoke program customized for their business
themselves. And instead of creating a system whereby--for
example, in technology, I have done a lot of work on
apprenticeship in tech. If you could partner with community
training providers and community colleges to provide some of
the actual structured education, that takes some of the cost
burden off; if you have some subsidy also up front for the
design and training your managers on what is your role here,
what is expected of you, and how long this is.
I think one of the challenges that we hear from small
businesses is that they tend to think about the cost in a short
term way. You know. And I had an intern. Right? I had her for
three months. I spent two months trying to train her, and then
she had two weeks of actually helping me. If I could have kept
her longer, then I would have seen that real return on
investment coming out.
And I think a lot of times there is a mindset issue, where
employers are seeing these talent investments as a short-term
cost and not keeping it long enough to actually see the recoup
of that cost. So I think structuring it longer is better for
the employer, actually.
Senator Coons. I do think that government has a role to
play as an aggregator of demand. Most of the small
manufacturers, small and medium manufacturers I meet with in
Delaware need four people with these skills or six people with
these skills or ten people with these, but not enough to have
them pay the money up front to design and register and run an
apprenticeship program long-term.
I do have a bill, surprise, with Senators Young and Moran
and Brown, the Apprenticeship Hubs Across America, that would
expand the registered apprenticeship model, specifically the
high-growth job market, and increase the availability of
apprenticeships in a diversity of businesses like high tech,
like hospitality, like home health care, that do not currently
have any registered apprenticeship programs.
Mr. Arensmeyer, in your testimony, you spoke about the need
to equip small businesses with workforce training resources.
And I think workers ought to have the ability to advance their
own skill and small business employers benefit when workers get
the opportunity to improve their skills. Why should government
make any investments in skills?
I have a bill that would create essentially a tax-preferred
savings account with a match up to a modest amount for those
who are low- and moderate-income. Why should government make
investments rather than employers in skills training?
Mr. Arensmeyer. I presume you are referring to the Lifelong
Learning and Training Account Act? Yes, I was going to mention
that actually because it does allow for government to match
savings that employees can put into a fund and use it for when
they need to for training.
I think it is essential that we--you know, there is a
public policy behind making sure we have got a skilled
workforce out there and--you know, this is a matching. This is
a way the government can leverage its money. It is not 100
percent. It is not covering 100 percent of the need. It is
matching.
And, look, we do this across our entire economy with tax
benefited health care, with tax benefits for retirement
savings. So this is really no different. This is the
government, you know, strategically using its resources to step
in and, you know, in a targeted way have a positive impact.
Senator Coons. How do you think providing a training
opportunity like that would help with retention and morale in
the workforce more broadly?
Mr. Arensmeyer. The training, specifically, the training
that is in your bill?
Senator Coons. Yep.
Mr. Arensmeyer. Well, it would be--it enables us to have a
more stable, skilled workforce that--then it enables the people
who get this training to put themselves into position to do
that job and then do other jobs and increase their
responsibilities in the economy, and you know, you end up with
a much more robust workforce by doing that.
Senator Coons. Great. Thank you.
Thank you, Mr. Chairman.
Chairman Cardin. Senator Hirono.
Senator Hirono. Just in time, it seems. I apologize if any
of these questions have been asked, but here we go.
So, Dr. Goger, am I pronouncing your name correctly?
Dr. Goger. Yes. Thank you.
Senator Hirono. So you mentioned the need for child care
because I think that just as we are having a really hard time
finding workers, if we are not providing accessible, affordable
child care that means that there are a lot of women, especially
those who because of the pandemic left their work--but they
need child care provisions to get back to work. So can you just
tell us a little bit more about any stories about women who
because of lack of child care they are not able to get back to
the workforce?
Dr. Goger. Yes, so what we saw is not only were women more
likely to be laid off in the pandemic because they are
concentrated in frontline jobs but also, you know, because of
school disruptions. Even today, my friend last week--she has
two girls. Her daughters' school was shutdown because there was
a COVID exposure.
So this impacts parents generally but predominantly women,
and I think that it is really challenging for women employed in
small businesses, like hospitality, because they cannot really
juggle these uncertainties and keep their job.
So that is why one of the things that I was talking about
is how could you pool funds from small businesses, through
trade associations and so on so, that you can do things like
share some of the costs for child care or get small businesses
together to reduce health insurance costs or to be able to
offer paid sick leave. I think that, structurally, small
businesses cannot afford a lot of these benefits, and that is
what is leading them to lose talent to larger companies. And so
I see that as really essential to being able to help women stay
and be able to show up in the workplace more regularly even in
the face of ongoing disruptions.
Senator Hirono. I agree with you that in spite of the
testimony that says that government should not be involved--in
fact, some of our panelists apparently take the position that
the less government does to try to be of help the worse things
are, and I do not agree with that position.
So to the extent that a lot of the women in our workforce
are more in the frontline positions, we lost a number of them
to COVID, and so I do think that as a developed country we are
very much behind in terms of child care support and also paid
family leave, that those things would help a lot.
So with regard to the supply chain, the COVID-related
supply chain disruptions have been driving price increases in
the U.S., which have disproportionately impacted working and
middle-class families, and we know these families are paying
more for everyday household goods like groceries, food, rent,
utilities, gas. And the Build Back Better included investments
to address supply chain vulnerabilities, but it has stalled in
the Senate. What kinds of investments should we consider to
improve supply chain resiliency in the United States?
Do you have any thoughts? For you, Dr. Grover.
Dr. Goger. Doctor--Okay.
Senator Hirono. Sorry. Goger.
Dr. Goger. Yes. This is a really long-running challenge
because for 40 years we have actually incentivized lean supply
chains that do not have resilience built in, and so we have
disinvested in our domestic manufacturing capacity----
Senator Hirono. Yes.
Dr. Goger.[continuing]. Including small businesses. We do
not have managerial expertise right now in our supply chains to
actually respond quickly to changes. And we really need an
agile workforce that can learn and change and adapt, and that
is why I think employer-provided training is so critical,
especially for small- and medium-size businesses that are the
source of a lot of the innovation that we see. In many cases,
it was small businesses that adapted the most quickly to some
of these demand shifts.
But I worry that the risks and the costs of all these
disruptions will be with us for a really long time unless we
can really start to use, you know, really concerted efforts to
invest back in building that small business ecosystem and
getting some of our diverse talent, you know, and diverse
entrepreneurs, their ideas. Some Harvard researchers estimate
that if we invested more equally in our talent we would
quadruple innovation in the United States. We do not have a
lack of people or a lack of ideas or a lack of talent, but we
are keeping people on the sidelines, so we need to remove some
of those barriers for innovation.
Senator Hirono. I think you also mentioned in your
testimony that we are not investing equally in Black
communities and Hispanic communities and we are losing out a
lot on the talent provided in these communities. I agree with
you.
Thank you, Mr. Chairman.
Chairman Cardin. Thank you, Senator Hirono.
Once again, I want to thank all four of our witnesses. This
has been a very, very helpful panel, different views, but I
think we all recognize the fundamental problem for small
business today is access to trained workers and a stable
workforce.
We have had hearings dealing with the challenges small
businesses have with capital, small businesses have with
dealing with supply chain disruptions, we had a hearing on
that, to deal with the regulatory burdens of small business.
But today, we really are concentrating at this hearing on
the issues concerning labor force, and there is no simple
answer to this. I think you all have really given us some
really good suggestions. We have programs that deal with job
training and apprenticeship, but it is very difficult for a
small business to access those programs in a useful way that
could be relevant to their current needs. So how do we fine-
tune these programs to make sure they are accessible to small
businesses?
There seems to be a growing consensus, as Senator Paul
indicated, on easing the immigration rules, certainly as it
relates to worker visas. I would point out that the general
immigration policies are just as important. The replenishment
of our workforce through normal immigration is important for us
to have a supply of workers in this country, not just those
that come under the worker visas.
And we do need to deal with returning citizens. That is a
significant number of people who have been disqualified in so
many opportunities that are really able to work, want to work,
and can be very reliable workers for themselves and for our
economy.
And then we get to the issues of affordability to work. We
have mentioned that. Not only child care but health care has
been mentioned. These are areas that we have to continue to
make sure we have a level playing field for small businesses so
that the workers--the businesses are not put at a disadvantage
with the workers that are available and can provide the
necessary incentives for them to work.
One other area that we have not talked about, just put it
on the table, is resource partners. We have invested a lot in
our resource partners, and they should be able to help provide
some of the services to make it easier to connect the dots
between the services that are available but that small
businesses do not have the capacity to be able to work through
how they get to those services.
So I think there is a lot of good suggestions that have
come out of this hearing, and I can assure you we will be
following up on this.
And once again, we thank you for your being here today, but
we are not going to let you off the hook. We expect that we
will be continuing to reach out for your suggestions and your
help as we try to help the small business infrastructure in
America.
With that, if there are no further comments, the Committee
will stand adjourned. Thanks.
[Whereupon, at 3:52 p.m., the Committee was adjourned.]
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