While wages in Kansas are trending up over the last year, the economic pressure of inflation is more than offsetting any gains workers see from the increase. And according to Great Bend Chamber of Commerce President Megan Barfield, it all adds up to a potentially bleak picture for local small businesses and consumers.
According the Kansas Department of Labor’s monthly labor report for March, released at the end of April, overall wages have increased by 6.6% over the past year. However, KDOL Economist Nathan Kessler said with the pressure of persistent high inflation rates, real hourly earnings actually declined 1.8% over that timeframe.
Essentially, this means the cost of goods and services are rising at a faster pace than wage increases, leading to an overall lessening of the purchasing power of the dollar. While some larger businesses can easily absorb this, it puts many smaller businesses in a fiscal bind.
Barfield acknowledged much of the wage increases in the area were needed to help improve the standard of living for many of the area’s poorest residents. Even with area workers are making more, though, they are also paying a great deal more for basic necessities such as gas and groceries, so workers are not getting ahead.
The same cost of goods that has consumers feeling the pinch also adds an extra layer of economic challenges for small businesses, she said. The increased cost of goods, combined with the increased labor costs that come with higher wages, often leaves smaller businesses facing difficult decisions.
One fear for small businesses, she said, is that the costs will increase to the point where they will no longer be able to compete price-wise with larger chain stores.
“The business has to make the decision as to how much (of the added cost) do they just absorb, and how much do they pass on to their consumer? I feel it’s a cycle,” Barfield said.
While consumers and small businesses alike are feeling the pinch, Barfield feels the economy has not seen the full ramifications of the cycle yet. “I feel like the cap is going to come off and (the economy’s) going to bust at some point.”
With a seasonally-adjusted unemployment rate of 2.5%, still holding at historic lows, another challenge local businesses continue to face is a lack of able bodies to fill open several open positions.
One of the trends she sees happening is because wages have gone up, fewer people are working multiple jobs to make ends meet, instead working a single job and opting for more family time. This leaves positions open with few or no workers to fill them.
Again, Barfield said, this forces businesses to figure out “how to do more with less,” because the labor shortage is not a problem she sees lessening anytime soon.
Because of the shortage, many businesses have opted to adjust their operating hours. For smaller businesses, this often means they are not able to be open during peak shopping times on evenings or weekends, making it more difficult to compete with larger businesses.
However, she said, local businesses are working collaboratively on creative solutions to these potentially long-term issues.
“During our Workforce Summit (last month), we were talking with businesses about having to get creative and think outside the box, and really look at their efficiencies,” Barfield said.