Despite headlines throughout 2023 forecasting a recession, recent data has indicated economic growth over the previous year. For many small businesses, this means increased demands and thriving local economies. However, with inflation at a level not seen in 40 years, the economy isn’t in the clear yet.

During the recent CO— Small Business Update event, experts from the U.S. Chamber of Commerce discussed the changing economy and shared strategies for small businesses to succeed in 2024.

  • Jeanette Mulvey, Vice President and Editor-in-Chief of CO—, interviewed Neil Bradley, Executive Vice President, Chief Policy Officer, and Head of Strategic Advocacy at the U.S. Chamber of Commerce, about the current state of the U.S. labor workforce.
  • Bradley discussed how small businesses can utilize innovative technology and clever recruiting tactics to thrive amid a nationwide labor shortage.
  • The pair highlighted important tax changes and new regulations for small businesses to be aware of to avoid noncompliance.

Nationwide low unemployment rates benefit the economy, but not small businesses

The U.S. unemployment rate is facing an abnormally low period, with roughly 71 people looking for work for every 100 open jobs, according to Bradley. While these low rates — sitting at 3.7% — have proven to be beneficial for the economy, they’ve posed a challenge for small businesses, leading to recruitment and staffing shortages nationwide.

Workers haven’t just disappeared from the workforce, though. Outside forces such as the COVID-19 pandemic led some workers to retire early, transition from a dual-income to a single-income household, or start their own businesses, resulting in higher unemployment numbers. Demographics have played a major role, too: Generational shifts like baby boomers retiring from the workforce have meant a smaller applicant pool and bigger consumer demands.

“We have a bigger demand because we're trying to meet the needs of a bigger population, but we're at this moment demographically where we have fewer people in their working years to meet that demand,” Bradley said.

Bradley suggested the U.S. government prioritize legal immigration, allowing more people to legally enter the country to add more workers to our workforce.

We have a bigger demand because we're trying to meet the needs of a bigger population, but we're at this moment demographically where we have fewer people in their working years to meet that demand.

Neil Bradley, Executive Vice President, Chief Policy Officer, and Head of Strategic Advocacy, U.S. Chamber of Commerce

Surviving and thriving amid the labor shortage will require strategy

Though businesses shouldn’t expect a thriving labor market for some time, they aren’t out of options; rather, it’s how they leverage their natural benefits that will make them an appealing choice for candidates.

“People want to work for small business[es] because it's a family, and small businesses often have flexibility that you can't get in bigger places,” Bradley said.

Companies with distinctive benefits that appeal to potential candidates should prominently advertise these offerings. Doing so can position themselves as attractive and competitive employers in a challenging market.

Additionally, to compensate for a smaller workforce, small businesses should experiment with artificial intelligence (AI) wherever possible to streamline operations and relieve existing staff from repetitive and time-consuming tasks. Not only can AI ease workloads, but it promotes growth by enabling employees to use their time more efficiently, focusing on areas that require their unique skills and expertise.

Regulatory and tax changes may impact small businesses this year

Small businesses are constantly adapting to new regulations, ranging from evolving tax requirements (such as the mandate to amortize R&D costs instead of expensing them) to updated procedures related to the Employee Retention Credit. A particularly significant change is the implementation of the Corporate Transparency Act, also known as the Beneficial Ownership Information Reporting Rule. This act, introduced by Congress as a measure to deter fraudulent activities involving shell companies, mandates that businesses must now disclose their beneficial owners to the government.

Another change is the Department of Labor’s revised rules concerning independent contractors. While the old regulations had just two requirements to determine one’s classification, a new multi-part test is expected to replace this which, Bradley warns, could lead to confusion — and possible legal ramifications including “penalties, fines, fees, and back taxes” — for small businesses. He used an example of a business that asks an independent contractor to follow its safety protocols when they’re in the workplace.

“It's possible that is an exercise… [of] control over the… independent contractor that makes them an employee in this circumstance,” Bradley explained. “It's little things like that that could easily trip up companies and create this type of legal uncertainty.”

To prevent accidental noncompliance, Bradley recommends small businesses review their policies and identify areas where they may be exercising control — or areas where “it could be alleged.” In cases where control is being exercised, consult with an attorney and HR experts to ensure the issue is properly addressed.

CO— aims to bring you inspiration from leading respected experts. However, before making any business decision, you should consult a professional who can advise you based on your individual situation.