Inflation. supply chain. Labor shortage. Those three things might be the easiest way to sum up 2022 for small businesses. The National Federation of Independent Business’ (NIB) optimism index is still below its 49-year average, meaning business owners are not optimistic about the future. Undoubtedly, much of this unrest was caused by the perennial impasse in Washington, where Congress and the White House were locked away. There are historic amounts of federal dollars to help local economies bounce back, but small businesses continue to face setbacks. December’s NFIB Jobs Report shows workforce quality is a top job issue for small employers. And while the same report puts the job vacancy rate at two points, 44 percent of small business owners say they have job openings they can’t fill, up from the historical average of 23 percent.
There will be many changes in Annapolis as a new governor, comptroller, attorney general and General Assembly are approved. No doubt new policymakers will have their own ideas about how to solve the problems Marylanders face. They move from campaigning to policymaking, and NFIB serves as a resource for understanding what small businesses want from their representatives. Certainly, there will be differences of opinion on policy, but attention must be paid to improving Maryland’s business climate. There has been progress over the years, but a weak recovery and the threat of an impending recession should prompt policymakers to stop doing anything that makes it harder for small business owners to attract, hire, and retain job seekers. Small business is the backbone of our state’s economy and anything passed by the General Assembly must reflect that.
There will be a variety of issues that are important to small businesses this year. Some will have an immediate impact on their bottom line and others will set them up for future success – or failure. Below are the issues the NFIB will be watching closely during the 90-day legislative session beginning January 11th.
It’s been less than four years since the General Assembly passed a statewide $15 minimum wage over opposition from small businesses. Our members have fought hard to demonstrate the incremental impact the move will have on running a business. Finally, the legislature proposed the ill-advised proposal. Despite opposition to the bill as a whole, lawmakers acknowledged some concerns from the business community by adding amendments. That is, allowing businesses with 14 or fewer employees more time to raise up to $15.
But now, policymakers, including the governor-elect, are expressing their desire to speed up the process. In addition, efforts may be made to tie the state minimum wage to inflation. The state’s gas tax, which increases annually in line with inflation, jumped 18 percent last summer. Small businesses simply cannot afford year-to-year increases.
Taken together, these proposals would have an excessive and devastating impact on Maryland’s small businesses.
The reality is that small businesses are already increasing voluntary compensation to attract and retain talent. The NFIB’s November Jobs Report shows that a net 40% of owners are increasing compensation. Arbitrarily raising the state minimum wage faster than our members plan, and at a time when many are already doing so, will hurt our small businesses. Especially in industries like retail and hospitality that are still struggling to reach pre-pandemic workforce levels.
In the year If House Bill 698 of 2022 were to pass — a bill that would similarly accelerate the $15 minimum — a small business owner with 15 employees would see their labor costs jump by more than $50,000 in the last six months of the year. That is simply not sustainable.
The state’s Unemployment Insurance Trust Fund (UITF) faced unprecedented stress during the pandemic. Record claims from 2020-2021 have pushed up employers’ UI taxes, with some reporting a 400-600 percent increase in tax bills in the first quarter of last year. The UI tax rates table jumped from A (lowest) to F (highest) in 2021. Thankfully, the NFIB, through legislative leaders and the Hogan administration, passed legislation to lower employer rates in 2022 and 2023. .
However, the relief may be short-lived as some policymakers want claimants to increase their weekly benefit amount. Linking benefit rates to inflation has also been reported. Increasing the rate would be unwise after the economic crisis that weakened the UTF at an unprecedented rate. And linking future benefits to inflation makes it harder to keep employers’ tax rates low. Remember, only employers contribute to the UITF in Maryland. Other states, such as New Jersey and Pennsylvania, include employee contributions in their funds. Asking small businesses to foot the bill is a tall order for raising fees.
Maryland is sitting on a “historic” total cash surplus. This session, the NFIB will work with any legislature seeking to improve Maryland’s business climate by using these profits responsibly and wisely to help our small businesses and communities, not to increase the cost of doing business in Maryland.
Mike O’Halloran is the Maryland State Director of the National Federation of Free Trade Associations.