Statement for the Record — John Arensmeyer, Founder & CEO, Small Business Majority, U.S. Senate, June 8, 2022

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A statement for the record before the U.S. Senate Committee on Small Business and Entrepreneurship, dated June 8, 2022, by John Arensmeyer, founder and CEO of Small Business Majority. It addresses the challenges small businesses face in retaining and recruiting workers, citing the organization's March 2022 polling that 52% of small business owners reported being negatively affected by workforce shortages. The statement urges policies on healthcare, including extending American Rescue Plan premium assistance, paid family and medical leave, childcare and retirement savings programs. It also calls for immigration reform, second chance hiring of justice-impacted individuals and workforce training support, including the Lifelong Learning and Training Account Act. The statement runs six pages.

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    STATEMENT FOR THE RECORD BEFORE THE U.S. SENATE COMMITTEE ON
                      SMALL BUSINESS AND ENTREPRENEURSHIP

                                              JUNE 8, 2022

                                         JOHN ARENSMEYER

                          FOUNDER & CEO, SMALL BUSINESS MAJORITY

Thank you, Chairman Cardin, Ranking Member Paul, and members of the committee.

My name is John Arensmeyer, and I am the founder and CEO of the national small business
organization Small Business Majority.1 As a leading representative of America’s 32 million small
businesses, Small Business Majority is pleased to testify today regarding the unique challenges small
businesses face when trying to retain and recruit a strong workforce. I also plan to offer several
solutions to overcome these challenges and suggestions for cultivating a strong, skilled small business
workforce through commonsense and meaningful policy changes.

Small Business Majority’s mission is to empower America’s diverse entrepreneurs to build a thriving
and equitable economy. We engage our network of more than 85,000 small businesses and 1,500
business and community organizations to deliver resources to entrepreneurs and advocate for public
policy solutions that promote inclusive small business growth. Our work is bolstered by extensive
research and deep connections with the small business community that enables us to educate
stakeholders about key issues impacting America’s entrepreneurs, with a special focus on the smallest
businesses and those facing systemic inequities.

Before launching Small Business Majority more than 16 years ago, I was the founder and CEO of ACI
Interactive, an award-winning interactive communications company. Based on my work at Small
Business Majority and ACI, I know firsthand that for a very long time small business owners have
faced challenges attracting and retaining talented employees. Key barriers facing our nation’s
entrepreneurs include the ability to offer quality affordable healthcare, paid family leave, childcare and
retirement benefits along with not having the same ability as big corporations to participate in
workforce training programs. Furthermore, small businesses don’t have the support they need to hire
from specialized populations such as immigrants and those who are justice-impacted.

It is no secret that the pandemic introduced new demands on small business owners. Small business
owners overwhelmingly cited labor shortages as one of the most significant challenges they faced as
COVID-19 continued to plague their recovery efforts. According to a recent survey from Goldman
Sachs, 87% of hiring small firms reported difficulties filling open positions.2 Polling conducted in
March 2022 by Small Business Majority revealed that more than half (52%) of small business owners
reported being negatively impacted by workforce shortages. 3




1 https://smallbusinessmajority.org/

2 https://www.goldmansachs.com/citizenship/10000-small-businesses/US/voices/policy-

agenda/documents/2022-report-summary.pdf
3 https://smallbusinessmajority.org/our-research/small-businesses-share-current-business-concerns-challenges-

federal-relief-programs
1015 15th Street NW, Suite 450, Washington, DC 20005 | (202) 828-8357          www.smallbusinessmajority.org
Despite limited resources, small businesses are doing what they can to address their workforce
challenges. According to our polling, small businesses have taken measures to create more incentives
for workers, such as: increasing pay (32%), increasing benefits (20%), creating more part-time
positions (26%), and hiring younger staff (23%).4 However, as emergency financial assistance from the
federal government has expired and additional assistance remains stymied by partisan politics, small
firms await the resources they need to sustain a long-term recovery.

The recent jobs report released by the Bureau of Labor Statistics showed there is a high demand for
workers, meaning that we are currently in a tight labor market. Many small firms have reported the
impact hiring and retention during a tight labor market has had on their bottom line. To attract talent,
they must compete with larger corporations that can offer more robust benefits, but they need to be
able to do so on a level playing field.

It’s important for policymakers to understand that small businesses simply do not have the same
resources or administrative capacity as large corporations to manage benefit programs like healthcare,
paid family leave, childcare and retirement. Therefore, we must support forward-thinking policies that
will help small businesses compete. Small Business Majority has outlined several solutions that will
strengthen the nation’s small business ecosystem and grow a skilled small business workforce.

Providing essential benefits

Healthcare

The “Great Resignation” has incited record numbers of new businesses and entrepreneurs. In the first
half of 2021, small businesses with fewer than 50 employees created 1.9 million jobs, the fastest start
to small business job growth in any year on record.5 It also exacerbated workforce challenges for small
businesses that had difficulty maintaining health benefits for their workers during a period of
uncertainty. As small businesses were forced to close, lay off staff, or cut health benefits for employees,
nearly 2.7 million people in the U.S. lost their health insurance over 12 weeks in the spring and
summer of 2020.6 Workers who lost access to benefits at small businesses were more likely to pursue
positions at larger firms that guaranteed access to health benefits, thus increasing workforce shortage
in the small business community.

These challenges are not new to small business owners because their employees have historically
comprised a disproportionate share of the working uninsured, and small businesses have consistently
identified healthcare costs as one of the top barriers to maintaining and growing their business. 7
However, the passage of the Affordable Care Act (ACA) allowed small business owners and their
employees to access crucial healthcare resources that support stability and affordability. Indeed, more
than half of all ACA marketplace enrollees are small business owners, self-employed, or small business
employees. 8 Data suggests that recent policies, particularly the American Rescue Plan (ARP), helped
fill the coverage gap.9 While many Americans lost employer-sponsored coverage during the pandemic,
new tax credits made available through the ARP, as well as other solutions, played an important role in
insulating the small business community from one of the worst consequences of the pandemic.

4 https://smallbusinessmajority.org/our-research/small-businesses-views-on-tax-reforms-workforce-shortages

5 https://www.whitehouse.gov/wp-content/uploads/2022/04/President-Biden-Small-Biz-Boom-full-report-

2022.04.28.pdf
6 https://jamanetwork.com/journals/jama-health-forum/fullarticle/2783874

7 https://smallbusinessmajority.org/our-research/entrepreneurship-freelance-economy/small-business-owners-

say-government-doesn-t-understand-their-concerns-need-help-healthcare-costs-and-other-challenges
8 https://smallbusinessmajority.org/our-research/healthcare/small-businesses-see-significant-gains-aca

9 https://aspe.hhs.gov/sites/default/files/documents/ed44f7bb6df7a08d972a95c34060861e/aspe-data-point-

2020-2021-uninsured.pdf
Small Business Majority                                  2                      www.smallbusinessmajority.org
However, the success of these affordable healthcare programs remains at risk and must be further
bolstered by:

    •   Extending the premium assistance provided by the ARP that has helped make healthcare more
        affordable for many entrepreneurs and their employees;
    •   Addressing the rising costs of prescription drugs, as these costs are hurting small business
        owners' bottom lines; and
    •   Passing the Medicaid Saves Lives Act to ensure that the benefits of expanded Medicaid
        coverage is extended to small business employees and others in the 12 states that have failed to
        do so on their own.

Paid family and medical leave

Small business owners know it makes good business sense to take care of their employees, as it is
crucial to retaining a productive and talented workforce. Unfortunately, many small businesses do not
have the resources to offer robust benefits that larger companies can provide, like paid family and
medical leave, which puts them at a disadvantage when it comes to attracting and retaining employees.
And private insurers generally do not offer affordable, adequate paid leave policies to small businesses.
As a result, as of 2019, only 14% of workers in firms with 99 or fewer employees had access to
employer-provided paid family leave, compared to 29% of workers in firms with 500 or more
employees. 10 This is why small businesses strongly support implementing a federal program that
would allow small employers to facilitate access to a paid leave program funded by employee and
employer contributions.11

A federal insurance program, like that proposed in the Family and Medical Insurance Leave (FAMILY)
Act and previous iterations of Presidents Biden’s Building a Better America plan, would go a long way
toward helping entrepreneurs and their employees through difficult times while also benefiting
business owners’ bottom lines. What’s more, 65% of small businesses support a proposal to establish a
national program that would provide four weeks of paid family and medical leave to anyone to care for
a new child or to care for a loved one’s serious illness or other covered medical leave issues. 12 Research
has found that paid leave programs have been popular with small employers in states where the
program has been implemented. For example, in California, which has had a paid family leave
program in place for more than a decade, some businesses reported cost savings due to reduced
employee turnover and most businesses saw no increased costs to their bottom lines. 13

Childcare

Access to quality, affordable childcare impacts the small business ecosystem in a multitude of ways
and therefore is an essential investment small business owners need to address workforce instability.

The lack of access to affordable childcare has also impeded the ability of small businesses to retain a
skilled workforce as parents have struggled to return to work amid extreme childcare challenges that
grew during the pandemic. Women especially have been forced out of the labor pool due to the lack of
access to affordable childcare during the pandemic. Childcare providers are feeling the pinch and we
are hearing from our network how this shortage is not only impacting their business, but also their
community.


10 https://www.bls.gov/ncs/ebs/factsheet/family-leave-benefits-fact-sheet.htm

11 https://www.nationalpartnership.org/our-work/economic-justice/paid-leave-resources.html

12 https://smallbusinessmajority.org/our-research/small-businesses-views-on-vaccine-mandates-supply-chain-

disruptions-and-build-back-better
13 https://smallbusinessmajority.org/our-research/workforce/california-small-business-owners-support-

expanding-state-s-paid-family-and-medical-leave-program
Small Business Majority                                  3                      www.smallbusinessmajority.org
“As a childcare provider, I know firsthand the impact of inadequate childcare on a community and
workforce. During the pandemic, my industry suffered tremendous losses and with the assistance of
federal aid, my small childcare business was able to buffer the effects of low enrollment on my bottom
line. But despite our best efforts, we were unable to return our workforce to pre-pandemic levels. Many
of our parents and staff could no longer afford to pay for childcare. The pool of educators willing and
able to return as childcare providers became very small. Access to affordable and quality childcare isn’t
a local problem; it is one that should be addressed on a national level. Government support for
childcare through long-term subsidies to nearly all working families would enable businesses like mine
to charge a little more in tuition and in turn, attract quality talent with the reward of better pay,” says
Ludmila Parada, president of Nelly’s Childcare and Preschool in Campbell, Calif.

Ninety-five percent of childcare providers in the United States are small businesses, and like Ludmila,
most childcare providers are women and people of color. Additionally, 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 business.13 Congress can help address this gap by expanding and improving
federal income tax credits for childcare expenses that would allow working parents to receive a
percentage of childcare expenses back as a tax refund.

Retirement and wealth building

The COVID-19 pandemic has highlighted the importance of wealth building, including saving for
retirement. As the small business workforce continues to recover, they are searching for the resources
they need to prepare for unprecedented financial setbacks. In order to compete and combat staff
shortages across multiple industries, small businesses want to provide their employees with retirement
packages to help them feel more prepared to face another possible global fiscal crisis. Unfortunately,
many small businesses do not have the resources or administrative capability to offer retirement
benefits to their employees. As such, a large percentage of small business owners support efforts to
establish publicly-administered retirement savings programs to help more small businesses, their
employees, and the self-employed save for retirement.14 In an effort to support retirement packages
that better fit the needs of smaller employers, we must expand state Secure Choice programs that offer
an easy “on-ramp” for employees to save for retirement. We must also pass a parallel federal program
such as that included in the pending Secure Act 2.0, while ensuring that self-employed individuals
have similar access.

Promoting a more robust workforce pool

Our country’s changing landscape provides us an opportunity to enact policies that would support
entrepreneurship bolstered by a ready workforce that includes immigrants and justice-impacted
individuals. To do that, we must reassess exclusive policies that restrict our ability to strengthen and
grow our workforce, such as outdated immigration laws and regulations that stigmatize second chance
hiring.

Immigrants

Immigrants are highly entrepreneurial, launching new companies at twice the rate of native-born
Americans and creating large numbers of jobs.15 This pool is prime for creating candidates that will be
able to strengthen the middle class while also boosting recovery in communities through job creation.
Research shows that immigrants generally complement rather than compete with American workers




14 https://smallbusinessmajority.org/our-research/entrepreneurship-freelance-economy/small-business-owners-

say-government-doesn-t-understand-their-concerns-need-help-healthcare-costs-and-other-challenges
15 https://www.sba.gov/sites/default/files/rs396tot.pdf


Small Business Majority                                   4                  www.smallbusinessmajority.org
because they have different skill sets and educational backgrounds. 16 Moreover, immigrants help grow
the economy by filling labor needs, purchasing goods and paying taxes. When more people work,
productivity increases. To keep this population engaged in the small business ecosystem, it is
necessary that we pass comprehensive immigration reform guaranteeing eventual citizenship for those
who contribute to our economic success. More immediately, we must expand the H-1B visa program to
allow more visas for both skilled and low-skilled foreign workers while decreasing the waiting period
for rejected applicants from one year to three months.

Justice-impacted individuals

Though often overlooked due to persistent stigma, second chance hiring opens an enormous untapped
talent pool for small employers. Research has shown that most employers hiring justice-impacted
individuals have positive experiences and notably lower turnover rates. 17 Small business owners within
our network have shared their own personal experiences with second chance hiring.

“I was initially very hesitant to hire someone who had been to prison. I was not sure how to ask
employment questions without sounding inappropriate. I ultimately decided to hire a justice-impacted
individual, and I’m glad I did. I valued his positive attitude more than the circumstances of his
criminal record. The relationship that I pursued became mutually beneficial because he is now one of
my most reliable employees,” shares Ron Nelson, president and general manager of Pioneer Overhead
Door in Las Vegas, Nev.

Justice-impacted individuals are often eager to contribute to their communities and to achieve
financial independence. These traits are highly favored and too important to overlook during a labor
shortage. When justice-impacted individuals come home after paying their debt to society, our
workforce will be positively impacted if we equip them with the tools and resources they need to
rebuild their lives, including opportunities for employment and entrepreneurship. Some of the tools
and resources needed include: supporting occupational licensing reform, implementing clean slate
procedures, and creating materials that will educate small businesses on the benefits of second chance
hiring.17 In turn, this population will themselves perhaps be inspired to launch businesses and careers
that provide them with income and generate economic prosperity.

Equipping small businesses with workforce training resources

As small businesses struggle to attract and retain talented employees in a tight labor market, many
know that offering workforce training will attract quality talent and retain skilled labor. A study by Pew
Research Center found that 87% of workers believe training and developing new job skills throughout
their work life is essential to succeed in the workplace. 18 But providing training and apprenticeship
programs is an investment that many small employers struggle to undertake.

If policymakers want small businesses to succeed, they must invest more in helping small business
owners get the resources they need to train a skilled workforce. We hear this firsthand from members
of our network.

“As a small employer, I pay for my apprentices’ training out-of-pocket, which costs about $100,000
over a five-year training period. These trainings are necessary for our field, yet there are no assistance
options through the government,” says Melanie Lichtfeld, owner of Lichtfeld Plumbing, Inc. in
Madison, Wis.


16 https://research.stlouisfed.org/publications/page1-econ/2014/05/01/the-economics-of-immigration-a-story-

of-substitutes-and-complements/
17 https://www.prisonpolicy.org/reports/outofwork.html

18 https://www.pewresearch.org/social-trends/2016/10/06/the-state-of-american-jobs/


Small Business Majority                                  5                    www.smallbusinessmajority.org
Since small firms rarely have enough time to dedicate to extensive staff training or sufficient funds to
pay for employee education, we are glad that the Lifelong Learning and Training Account Act was
reintroduced by U.S. Senators Mark R. Warner (D-VA) and Chris Coons (D-DE) earlier this year. We
support this legislation as it will be a huge boost to small businesses by offering them another way to
invest in developing their staff. This legislation will also help solo entrepreneurs invest in their own
development and acquire skills without the aid of an employer.

The Lifelong Learning and Training Account Act is an example of legislation needed to promote a more
robust workforce pool while making lifelong learning more accessible for low- and moderate-income
workers. Additionally, we must implement studies that ensure Workforce Innovation & Opportunity
Act (WIOA) programs are meeting small business and worker needs. We also recommend establishing
regional economic clusters and partnerships that include educational institutions such as community
colleges with the resources to provide industry-focused training and skills development. Enacting
these policies and programs will expand internship and mentoring opportunities that will create career
paths for youth and ensure access to skilled, entry-level workers for small businesses.

Conclusion

More than two years into the pandemic, small businesses are slowly rebuilding but need a vibrant
stable workforce to fully recover. Entrepreneurs, especially those in under-resourced communities,
need an array of support to address labor shortages and ensure employees are able to come back to the
workforce. I appreciate the opportunity to comment on these critical issues and I thank you for your
time.




Small Business Majority                               6                     www.smallbusinessmajority.org


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