Report: Small business challenges in hiring and training employees in California
It’s no secret that the COVID-19 pandemic has had a devastating impact on businesses, jobs and communities across California, with thousands of small businesses closing shop and millions of Californians seeking unemployment assistance for the first time. Importantly, the pandemic has exacerbated the challenges and inequalities facing small businesses, particularly for the smallest businesses and those owned by people of color. As we strive to get Californians back to work, it’s important to understand the needs of small business owners in hiring and training employees in order to better support our state’s job creators to rebuild stronger than before.
Small businesses are vital to the strength of California’s workforce. According to the US. Small Business Administration, most businesses in California are small and they generate seven million jobs. Most of these jobs are created and sustained by very small businesses with fewer than 20 employees. These small businesses are also more likely to hire locally, creating valuable opportunities for workers, particularly those in low-income communities; this is especially true for businesses owned by people of color. Small businesses also regularly provide employees with job training and opportunities for advancement, which enables workers to learn, grow and progress in their careers. Unfortunately, these job creators have been hit particularly hard by closures and stay-at-home orders during the COVID-19 pandemic.
To better understand the ways small business owners approach hiring and training, as well as to define small business needs when it comes to these aspects of business development, Small Business Majority conducted an online survey of small business owners across the state and held separate focus group discussions, interviews and other convenings with small employers and workforce development stakeholders and business support organizations.
We found that small business owners in California feel generally unsupported—they rely on themselves for nearly all of their hiring and training needs. They are very concerned about the quality of the workforce, particularly younger members of the workforce who may lack soft skills. Additionally, small businesses’ hiring practices are largely informal. Business owners rarely hire in advance, and when they are hiring they often use word of mouth. What’s more, business owners agree that training is a need, although the top training they want is related to general life skills.
This report examines these and other issues in detail, as well as provides recommendations that workforce development boards and other workforce stakeholders can utilize to better support the small businesses that create and sustain quality jobs.
Small business challenges in hiring
- Business owners of color tend to have a more diverse workforce. Additionally, women business owners tend to hire more women employees.
- Business owners’ current hiring practices are largely informal. They rarely hire in advance, and when hiring, they often use word of mouth. Throughout the focus groups, small business owners in each region mentioned they feel generally unsupported and they rely on themselves for nearly all their hiring and training needs.
- Workforce development organizations can better forge connections with small businesses with hiring needs by providing Human Resources services like background checks on candidates, as well as by providing general small business services, especially to newer businesses.
- Soft skills are still reported to be lacking among job seekers. This is more acutely challenging for small employers. Essential skills are something that many focus group participants continue to say are needed. Most participants felt they are equipped to support job seekers with on-the-job training, but they are not prepared to teach essential life skills.
- Small businesses typically provide some form of training for their employees. These trainings are roughly split between outside contractors and internal staff. Smaller businesses tend to use internal staff to train new staff.
- Small business owners see themselves as being in line with or better than others in their industry when it comes to pay and benefits. Additionally, the training they offer often leads to higher wages once these new skills are acquired.
The workforce ecosystem
- California small business owners need help accessing resources for hiring and training, and there is no single source they can turn to.
- Local community colleges have a very strong reputation among small business owners. There is a widespread belief that those enrolled in community colleges are more interested in having a job and therefore will yield better workers.
- Awareness of workforce development organizations is low, but potential benefits are high. While most small business owners are not aware of Workforce Development Boards, they become more interested once they learn about their services.