(This column originally appeared in Entrepreneur)
Opinions expressed by Entrepreneur contributors are their own.
When I think of St. Louis, I think of Midwest charm, baseball at Busch Stadium, tasty BBQ and even better jazz. It’s a great city, and how can it not be? Yogi Berra, Chuck Berry and Joe Buck all come from there! But unfortunately, it hasn’t been so great for small businesses. At least, not when it comes to hiring. That’s because, when compared to all other major cities in the country, employers in St. Louis are having the toughest time finding workers.
According to data from the U.S. Census Bureau, analyzed by researchers at healthcare consulting firm HelpAdvisor, 46% of small businesses in St. Louis had trouble hiring new employees in April, the worst among all cities in the study. Unfortunately, the problem isn’t limited to St. Louis. Nationally, Missouri ranked as the state with the highest number of small businesses facing hiring struggles, at 44%. That is 16 percentage points higher than the national average of 30%.
Why are employers in St. Louis and Missouri finding it so challenging? There is a multitude of factors, not least the state’s unemployment rate — at 3.1% — which is among the nation’s lowest. But there are two more significant factorscontributing to this problem — reasons that should be of concern to all employers: childcare and transportation.
According to HelpAdvisor, the Missouri job center reports that 40% of Americans who are out of work cite one or both of these problems as a reason why. “Numerous childcare centers throughout Missouri shuttered their doors during the pandemic, and many have either not re-opened at all or have re-opened with limited space,” says Christian Worrell, the researcher behind the report. “Transportation issues have presented a rippling effect. Many bus drivers were let go during the pandemic, which led the St. Louis bus system to suspend or reduce the frequency of many routes, which in turn led to even more unemployment among those who rely on the bus system to get to work or a job interview.”
In poll after poll, small businesses cite labor shortages as one of the most significant issues (inflation being the other) they’re facing this year. Now, there are more than 11 million unfilled jobs and millions of workers who have seemingly disappeared from the workforce since before the pandemic. There are numerous reasons for these shortages, including government stimulus and unemployment benefits keeping people at home, older workers taking early retirement, lingering fears over Covid-19 and remote working combined with an increase in household wealth that’s fueled more side-gigs and startups and an explosion in independent entrepreneurs.
Many of my clients struggle to figure out how to fill their open jobs without breaking the bank. A number of them have raised wages. But this isn’t going to be enough. To me, the data from Missouri isn’t just a Missouri problem. It’s a national problem. And the problem is that employees really need help with their families. And they need help with their time. The good news if you’re a small business owner is that you can provide this kind of help and it won’t cost as much as you think.
Let’s start with childcare.
Thanks to generous tax benefits, employers can reimburse employees by setting up Dependent Care Flexible Spending Accounts. That way, their workers (or the employer) can contribute up to $5,000 per year tax-free to these accounts and then, after submitting child and dependent care expenses — costs directly related to caregiving services so that an employee can go to their job — can get reimbursed. Most plans allow unused funds of up to $550 to carry forward to the following year.
Employers who contribute also get a tax deduction. This benefit isn’t just for children because, under certain conditions, reimbursement for elder care is also allowed.
There are even more childcare benefits available.
If a business owner is so inclined, they can set up a childcare facility on their own or with other businesses or contract with an existing childcare provider and take advantage of a potential $150,000 tax credit too. At the very least, employers should provide counseling services from outside experts to teach their employees how to maximize the federal Child and Dependent Care Tax Credit. If maximized, it can provide as much as $6,000 of tax savings for working parents paying for nannies, daycare, preschool, day camp and other related expenses (these expenses must be separate from any expenses claimed under the above flexible spending account). It’s a complicated rule which is why giving employees access to a financial expert is such an important benefit.
Regarding transportation, of course, it’s important to provide work from home and flexible schedules wherever possible. Commuting expenses aren’t deductible, but many companies provide reimbursement. And there’s a growing number of cities — like my hometown Philadelphia — that require employers to reimburse their employees up to $20 per month for the cost of commuting to their jobs, even going so far as making them reimburse workers that purchase bicycles. Not a bad idea for St. Louis to consider, right?
Small businesses that work to accommodate their employees’ schedules — whether by adopting 4-day workweeks, expanding paid time off or allowing more time working from home — will find themselves at the receiving end of more loyalty and productivity without having to incur any more compensation costs.
I’m confident that, as the economy recovers and more workers return to their jobs, there will be some relief for many small businesses desperately looking for workers. But I also realize that labor shortages will continue for the foreseeable future, which means that small businesses will need to be creative in the compensation and benefits they provide. Sure, health insurance and retirement benefits will always be essential. But if you’re running a small business in St. Louis or anywhere else in America and want to focus on what’s needed, step up your childcare benefits and provide more flexibility. Neither will cost as much as you think.