Opioid Crisis Takes Toll on Small Businesses as Unemployment Drops

Increases in drug addiction worsens workforce shortage and skills gap problem
June 17, 2018 Updated: June 18, 2018

WASHINGTON—With unemployment being at an 18-year low, small businesses are struggling to fill job openings and retain workers. Mounting opioid usage in the country is making the situation even worse, as in some areas, only 25 to 30 percent of job applicants can pass a drug test, said a small-business owner.

The U.S. job market is booming with low unemployment, strong job growth, and increasing wages. While this benefits American workers, a shortage of workers limits the ability of businesses to expand and grow.

“There are no words that can describe the harm opioids and other drugs are having on our area in rural Ohio,” said Angela Dine Schmeisser, president and CEO of St. Marys Foundry, a small business located in St. Marys, Ohio.

“Couple this with the perception or stigma that manufacturing is outdated and legacy work, the shortage of skilled and unskilled workers has turned into a perfect storm,” she said at a June 14 hearing on workforce shortages before the Economic Growth, Tax, and Capital Access Subcommittee of the House Small Business Committee.

St. Marys Foundry is a family-owned business that produces metal castings for various sectors, including natural gas compression, pumps and valves, municipal water, and energy transmission. The company employs 160 workers and has recently advertised 16 job openings. But of the 76 job applicants, 46 failed the onsite drug test, said Schmeisser.

The company ended up hiring 24 of the applicants but the problems did not end. Eight didn’t attend the plant orientation, three didn’t show up on the first day of work, and nine were terminated because they missed work or stopped coming to work altogether.

“Today, out of the 76 applicants, only four individuals remain at our facility,” Schmeisser said.

The labor shortage is a big challenge for employers like Marys Foundry, with the local unemployment rate reaching record low levels. Finding drug-free applicants is a real struggle, according to Schmeisser.

“Typically, only 25 to 30 percent of prospective employees can pass the drug test,” she said. “Given the fact we have heavy equipment and molten metal in foundries, it is critical that our workers are drug-free.”

In addition, most applicants have poor work ethics, creating a challenge for small-business owners.

“Many of our applicants lack basic life-skill knowledge about how to be a good employee. They struggle with coming to work every day, as opposed to most days,” Schmeisser said.

There are nearly 30 million small businesses in the country and they employ almost half of all private sector workers and create roughly two of every three new jobs.

Although small businesses are a significant component of the workforce, they generally lack the resources to compete with larger companies during periods of low unemployment.

Job vacancies have become one of the major concerns of many small-business owners. According to the National Federation of Independent Business (NFIB) April 2018 report, 57 percent of small-business owners either hired workers or were planning to hire workers in April, but a large majority (88 percent) of them had trouble finding qualified candidates.

“The shortage of qualified workers is clearly holding back even stronger economic growth,” stated Bill Dunkelberg, NFIB’s chief economist. “The high demand has real impacts. In some industries, nearly half of the firms have unfilled openings.”

Improving the Education System

The opioid epidemic is having a negative impact on local businesses throughout the country.

“That’s a recurring story we’re hearing from everybody,” said Rep. Dave Brat (R-Va.), chairman of the Small Business Subcommittee on Economic Growth, Tax, and Capital Access.

According to Brat, it is important to solve the problem early in the K–12 and motivate children, particularly those who are not on the college track, to learn certain job skills.

“We have pushed the ‘every kid goes to college’ model for too long and that’s not serving everybody,” he said. “If you don’t get kids into the job pipeline then they’re going to have a housing problem, a transportation problem, and maybe a drug problem.”

The labor shortage is especially severe in the construction and manufacturing sectors.

According to Schmeisser, altering public perceptions about manufacturing jobs is also critical to addressing the worker shortage in the sector, especially among millennials and this requires improving the education system.

“Many of the vocational and technical programs available to high schools around the country have been reduced or outright eliminated,” she said. “Companies have scaled back or eliminated apprenticeship programs that were prevalent in the 1940s, ‘50s, and ‘60s.”

To help address this problem, President Donald Trump signed an executive order last year to reform education and expand access to apprenticeships and workforce-development programs in the country. The plan aims to ease the regulatory burden on apprenticeship programs and integrate classroom learning with on-the-job training.

The president has also proposed to reform the Carl D. Perkins Career and Technical Education (CTE) program in order to provide skills-focused education to more students. Trump argues that Congress needs to improve the CTE program so that federal funds can go to career education programs.

The House unanimously passed an update to the Carl D. Perkins Career and Technical Education Act, but the Senate hasn’t taken any action yet.

“This legislation enables resources for secondary schools and community colleges to teach manufacturing skills among other technical trades,” Schmeisser said. “We hope that legislation will pass when it is brought to the Senate floor.”

With the increase in job creation, the number of job openings and unfilled positions is currently at its highest level since 2000. The increase in unfilled jobs hinders business growth, and therefore, economic growth, say experts.

 

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