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CBIA: Labor Shortage is Top Issue Facing Connecticut Employers

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  • CBIA’s 2021 Survey of Connecticut Businesses shows a slight improvement in optimism among business owners
  • Labor challenges are the most commonly identified barrier to growth, typically due to a lack of necessary skills
  • Most businesses have not established their own COVID-19 vaccine requirements, although a slight majority is in favor of a government mandate

Summary by Dirk Langeveld

Connecticut business owners were slightly more optimistic about economic conditions in the state amid a steady recovery from the COVID-19 pandemic, according to the 2021 Survey of Connecticut Businesses by the Connecticut Business & Industry Association. At the same time, they were generally wary of Connecticut’s business climate and much more likely to be experiencing the labor shortages that have affected companies nationwide.

The annual survey, done through support by the accounting and advisory firm Marcum LLP, was issued to 3,000 business executives between Aug. 4 and Sept. 8. CBIA received 625 responses, the vast majority of whom were small business owners employing fewer than 500 people. Thirty-six percent of respondents were manufacturers, while 14 percent were construction companies.

Labor challenges

Four out of five respondents said they have experienced trouble finding or retaining workers. Finding workers was more challenging, with 48 percent saying they had encountered challenges in doing so. While just 1 percent said they were having difficulty retaining workers, 31 percent said it was a challenge to both find and retain employees. Thirty-nine percent said they had experienced difficulty in getting former employees who had been furloughed or laid off to return to their company.

Thirty-five percent said a shortage of labor was their greatest obstacle to growth, a year-over-year increase of 17 points. This was nearly double the next greatest challenge, high business taxes, which 18 percent of respondents said was their main obstacle to growth.

One-third of respondents said candidates for their job postings don’t have the necessary skills or expertise. Twenty-six percent said poor work ethic was a major obstacle to finding workers.

Twenty-one percent said they were having trouble competing with other companies able to offer better pay and benefits. Twenty-four percent said they would invest in improving benefits and company culture in an effort to retain workers.

Forty-one percent said they expect to return to full-time in-person work by the end of 2021. Although 72 percent of employers had implemented a remote work policy in last year’s survey and 51 percent of this year’s respondents said at least part of their workforce has been working remotely since the start of the pandemic, 83 percent said they don’t expect to implement a remote work or hybrid schedule.

Connecticut’s pandemic challenges

CBIA says the state’s economic output contracted by 4.1 percent during 2020, with Connecticut losing 292,400 jobs in March and April of 2020. Thirty-nine percent of respondents in the 2021 Survey of Connecticut Businesses said they had cut employee hours, laid off employees, or furloughed staff due to the pandemic. Connecticut also experienced a 15 percent drop in commodities exports in 2020.

Eighty-eight percent of survey respondents said they had applied for assistance through the Paycheck Protection Program during the pandemic, with 20 percent seeking relief from other U.S. Small Business Administration programs as well. Business leaders were less likely to take advantage of tax credits, with just 18 percent using the Employee Retention Tax Credit and 28 percent saying they were unaware of this option.

Both state and national GDP grew in the third and fourth quarters of 2020 as well as the first and second quarters of 2021. However, the state is lagging in jobs recovery, recouping just 69 percent of the jobs lost in the pandemic against the national rate of 76 percent. Connecticut’s unemployment rate has also remained stubbornly elevated above the national rate since the start of the pandemic.

COVID-19 vaccination

CBIA said that with the recent surge in COVID-19 cases and resistance to vaccines creating challenges for employers, Connecticut’s high COVID-19 vaccination rate can be considered one of the advantages of its business climate. Two-thirds of the survey respondents said at least three-quarters of their workforce is vaccinated.

This data was closely aligned to the share of businesses indicating that their operations have been disrupted by COVID-19 cases on staff. Seventy-three percent said they hadn’t experienced such disruptions, while 26 percent had.

Eighty-eight percent hadn’t established a COVID-19 vaccine mandate at their company. However, 52 percent were in support of mandates being established at the federal, state, or local level, while 37 percent were opposed.

Opinions of legislature

Opinions of the Connecticut General Assembly’s actions improved slightly, with 22 percent approving of them – up from 17 percent in 2020. While 51 percent disapproved of the legislature’s actions, this was down from a 91 percent disapproval rate in CBIA’s 2019 survey.

CBIA said the legislature’s passage of a two-year budget with no broad-based tax increases, an overhaul of Connecticut’s unemployment insurance system, and investments in workforce development and child care likely contributed to the more positive perceptions.

Asked what the legislature’s goals should be, 24 percent said state pensions and spending should be reformed. Twenty-three percent advocated for lower taxes, 16 percent for workforce development, and 10 percent for business-friendly policies.

Business outlook

Thirty-three percent of respondents said they believe their business will grow in the next six months, up 13 points from 2020. Sixty-four percent of companies reported profits in 2020, down from 77 percent in 2019. However, 67 percent expect that 2021 will be profitable while just 8 percent think they’ll experience losses.

Forty-three percent reported sales growth, the highest share since 2018 and up from 25 percent in 2020. Thirty-nine percent said they expect the Connecticut economy to grow, although just 16 percent perceived the state’s business climate as improving while 46 percent saw it as declining.

CBIA said challenges to economic growth in Connecticut include the persistence of the pandemic, the high cost of living in the state, and the labor shortage. In addition to the high rate of vaccination, it said causes for optimism about the state’s economy include the lifting of business restrictions in May and several high-profile relocations of companies to Connecticut.

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