The independent newspaper of the University of Iowa community since 1868

The Daily Iowan

The independent newspaper of the University of Iowa community since 1868

The Daily Iowan

The independent newspaper of the University of Iowa community since 1868

The Daily Iowan

The Effects of Low Unemployment Rate: Things a Business Owner Should Know

The unemployment rate has been through quite a few changes over the past few years. When President Joe Biden initially took office in 2021, the unemployment rate was 6.3%. Nowadays, it’s just around 3.4%. People are getting jobs today and the economy has never been better.

Many would assume that a low unemployment rate is a good thing, and for the workers, it is. However, for business owners, this is not such a positive sign. While a low unemployment rate is often a reason to be celebrated, here is how a business owner may be affected by it.

1. Recruitment and Employment Retention Becomes Difficult

The most obvious disadvantage of a low unemployment rate for business owners is the difficulty of recruitment. With more and more employees having jobs or opportunities, the candidate list is becoming much shorter. People can now afford to be picky about the jobs they take, which makes it much more difficult for employees to fill a spot.

Even if the person has already been hired, there is no guarantee that they will remain within the company as well. With the number of job openings increasing, employee retention has become difficult to achieve for many CEOs. They may just end up leaving the company in favor of someone offering better benefits.

This forces business owners to employ a variety of tactics for retaining their employees. Said tactics include investing in benefits, offering promotions, giving higher wages, or prioritizing work-life benefits. While this is a great opportunity for the workers themselves, it can bring additional costs to the business owner.

This problem with recruitment and retention may bring the employer into a continuous recruitment cycle. They will have to advertise vacancies and spend precious time on interviews over and over again. This can be very expensive and frustrating for a business owner that wants to focus on business expansion.

2. It May Call for Wage Inflation

When the unemployment rate is at a high percentage, people are looking for jobs left and right. At that point, they are not too picky about where they can find employment and will take whatever job is thrown at them. This is also good for business owners because it helps them fill their positions much faster.

Things change when the unemployment rate is low. With people having jobs that they are content with, those positions would be much more difficult to fill. This would especially be the case if the wage is too low. As a result, businesses would need to increase the wage to attract more people for the position. This can affect the finances of the business.

3. There May Be a Productivity Dip

When the employment rate is low, the best employees already have a place of work somewhere else. This forces the employer to do one of two things: they increase the wages to attract workers into switching over, or they settle for less-talented workers. The latter would receive lower pay, but in turn, this can affect the productivity of the business.

When productivity is affected, this can lead to a drop in business growth. To maintain good productivity levels, business owners need to put more effort into the hired staff. This can include more training and use of company resources, which can affect their finances in the long run.

4. Current Employees May Be Unhappy

When there is a limited pool of people to hire for a position, many business owners are left with gaps in the company until someone fills them. However, this does not mean that the responsibilities are not there. It merely means that they are delegated to other workers, even if it is not exactly in their job descriptions.

Dallas, for instance, has been ranked as the 8th most overworked city in America (not just Texas). As the companies are understaffed, workers are given more tasks that they can take, leading to burnout. This extra work does not always come with a raise, which is why many people end up leaving or suing the company. Without a good Dallas business attorney, this can lead to some very expensive lawsuits for the company.

The Bottom Line

In the end, a low employment rate may sound good for the economy and the people looking for a good job opportunity. However, for a business owner, things are not that simple. For them, it means that it’s much harder to find a reliable and talented worker – and when they do, they will have to spend a lot of money to keep them.

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