Workforce Update: Small business is at the heart of an inclusive economic recovery

No sector was immune to the impact of the Covid-19 pandemic and recession. But the path to economic recovery will look different on an industry-by-industry basis – some of the jobs lost or furloughed due to the pandemic will simply not come back, some small businesses are struggling to remain afloat, and the outlook on how long it will take business to return to normal grows more uncertain.

Good skills policies for an inclusive economic recovery must incorporate the needs of businesses so that investments in education and training are tied to labor market demand and leverage best practices, like work-based learning, to train workers for skilled positions.

Sector recovery so far

Payroll employment gains occurred over the last three months, with month-over-month comparisons illustrating what industries are coming back online as states progress along their reopening plans. Yet the announcement of an economic recession with a February 2020 peak in economic activity – coinciding with a near economic stoppage in March – makes for a complex story in how far this recovery must go to regain the 13 million jobs still lost.

Here are some notable highlights in industry employment between February and July 2020:

• Leisure and hospitality, down 4.3 million jobs – While the leisure and hospitality industry had the largest increase (2.1 million) in jobs between May and June 2020, there is no doubt that this sector was one of the hardest hit due to temporary business closures and state stay-at-home orders, as seen by the massive number of Unemployment Insurance claims from its workers. Workers in this sector have the lowest average weekly earnings, and Black and Latinx workers hold a disproportionate share of jobs. As more business closures become permanent, low-wage workers in this sector will need support to retrain for occupations in other growing industries. Currently, more than one-third of hospitality workers lack digital skills important for career advancement.

• Professional and technical services, down 1.6 million jobs – This industry spans high-skill professional business services – like information technology, engineering, and marketing – to company headquarters and a range of office and administrative services to support businesses. While workers in professional occupations were more likely to telework during the pandemic, the temporary help services sector saw the greatest job losses over the last three month as hiring paused and staffing services were not needed.

• Education and health services, down 1.6 million jobs – Given the prominent role of health care workers in frontline jobs during the pandemic, it might seem surprising to see job losses in this sector. However, the pandemic had varying effects on health care workers, as the demand for or availability of routine or elective services declined. Some health care workers were able to rapidly upskill and transition to other health-related sectors to support the pandemic. Education, of course, was notably impacted as school districts and colleges shifted to distance learning. And traditionally this is a sector that sees increased demand during a recession. The fall outlook for new college enrollment has improved among some institutions since the start of the pandemic, with trends suggesting students are attending institutions, including community colleges, closer to home.

• Retail trade, down 913,000 jobs – Like the leisure and hospitality sector, retail trade businesses were halted in the early months of the pandemic. One notable exception was grocery stores that continued to add jobs to their payroll over the past few months, as these jobs were deemed essential. Yet the headlines have been filled with large retail chains cutting stores or closing altogether. Without retraining and other supportive services, some adults will find it difficult to compete in a labor market saturated with job applicants, especially when one in three retail workers lack digital skills.

Finally, while no sector experienced job growth between February and June 2020, utilities (8,000), mining (93,000) and information (330,000) had the smallest national job losses.

Businesses can drive industry recovery

While the pandemic disproportionately impacted businesses in certain industries, there has also been varying effects by business size. Small businesses are essential to our economy, providing vital services and employment opportunities to local communities and residents. They were also most heavily impacted by the economic disruption of the last five months. Estimates of small business closures already surpassed the 100,000 mark and the number of small businesses open at all was still 20% below their pre-pandemic levels, as of mid-July.

Businesses are an integral part of an inclusive economic recovery. Through local and regional industry sector partnerships, small employers – along with community colleges, the workforce system, unions or labor-management partnerships, and community organizations – can take a leadership role in shaping re-training strategies to meet their skill needs while providing pathways for workers to good jobs in demand. This work already naturally begun during the pandemic to support employers who faced shortages for frontline health workers. And these partnerships should expand to other sectors who need skilled workers and for local businesses who want to advance the skills of their existing workforce to respond to workplace challenges associated with technological change.

An inclusive economic recovery for small businesses must include investments to ensure they – and the communities they call home – return stronger than their pre-pandemic economic conditions. This includes skills policies that provide displaced workers with the occupational mobility to move from contracting industries to skilled jobs in growing ones, supports participation in local sector partnerships, and provides small firms with publicly subsidized on-the-job training, work-based learning, and upskilling for their workers.

Take action

With unprecedented job loss due to the pandemic, displaced workers need a legislative response that invests in our recovery to reskill displaced workers for new jobs in growing industries and support businesses who want to upskill workers still on the job. Yet, the Senate’s recent package includes $1 billion in workforce funding, or only about $20 of re-employment support for each person laid off during the recession.

Stimulus investments also need to help keep workers on the job and empower businesses to upskill current workers with the digital and occupational skills necessary to succeed in 21st century careers. We are calling on Congress to invest $1 billion in a new Incumbent Worker Training formula fund that supports bringing industry partnerships to scale and empower incumbent worker training.

Make your voice heard: investments in our public workforce system and industry partnerships are necessary for businesses to be a part of an inclusive economic recovery.