Survey: Michigan is Preparing to Push Small Businesses Off a Cliff

Small businesses in Michigan are increasing pay and benefits for employees, even as they are still reeling from inflation and facing new government mandates, according to a new survey.

“Michigan’s smallest operators are expressing concern and reporting a loss of confidence, ahead of new regulations on them that will hit in just six months,” says Brian Calley, president and CEO of the Small Business Association of Michigan in Lansing.

“Half of those we talked to said they are already trying to reduce expenses to prepare for a possible recession. They simply will not be able to sustain further increased costs. The cliff is in sight now: in February, they’ll start to fall over it.”

In the latest survey, inflation remains the top concern among respondents, which mirrors the 1 ^st quarter survey from earlier this year. Ninety-three percent of small businesses say they’re experiencing increased costs at rates higher than normal.

The second highest concern in the latest survey is availability of labor, with 200,000 jobs still unfilled across Michigan, even as most report offering higher wages, benefits, and flexibility.

While inflation is beginning to settle, 78 percent of those surveyed said they’ve increased pay at least 5 percent for their employees in the past year, and 26 percent report pay increases of 10 percent or more.

Seventy-nine percent already offer flexible paid time off, a benefit that would be reduced for most employees and replaced with narrow sick time leave if the Michigan Legislature does not fix the law recently modified by the courts.

The amount of the minimum wage increase that takes effect in February 2025 is still unclear, but what is clear is that it will affect restaurants, small businesses, and rural areas disproportionately, even though businesses of all sizes have been increasing wages already.

“Small businesses are the most trusted institutions in our nation, and we know that people support their local economies as best they can,” says Calley. “But the more the government increases costs, the closer to the cliff our small businesses are pushed.”

Small businesses reported less optimism overall, with the survey finding a 13-point drop in their short-term outlook — 37 percent are optimistic about their prospects for the next 6 months, as opposed to February 2024, when 50 percent were optimistic.

A similar drop was found in long-term survival outlook, with 54 percent reporting they’re optimistic, a drop from 12 points compared to February 2024, when 66 percent were optimistic.

The quarterly survey garners roughly 500 responses from a variety of industries and geographical range across the state. 80 percent of respondents are small businesses with 50 employees or less.

The Small Business Association of Michigan focuses solely on serving the needs of Michigan’s small business community through advocacy, collaboration, and buying power.

Today, they serve more than 32,000 members in all 83 counties of Michigan.

For more information, visit https://www.sbam.org .

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