[Senate Hearing 117-327] [From the U.S. Government Publishing Office] S. Hrg. 117-327 THE SMALL BUSINESS WORKFORCE CHALLENGE: CAUSES, IMPACTS, AND SOLUTIONS ======================================================================= HEARING BEFORE THE COMMITTEE ON SMALL BUSINESS AND ENTREPRENEURSHIP OF THE UNITED STATES SENATE ONE HUNDRED SEVENTEENTH CONGRESS SECOND SESSION __________ JUNE 8, 2022 __________ Printed for the Committee on Small Business and Entrepreneurship [GRAPHIC NOT AVAILABLE IN TIFF FORMAT] Available on: http://www.govinfo.gov __________ U.S. GOVERNMENT PUBLISHING OFFICE 48-247 WASHINGTON : 2022 ----------------------------------------------------------------------------------- COMMITTEE ON SMALL BUSINESS AND ENTREPRENEURSHIP ONE HUNDRED SEVENTEENTH CONGRESS ---------- BENJAMIN L. CARDIN, Maryland, Chairman RAND PAUL, Kentucky, Ranking Member MARIA CANTWELL, Washington MARCO RUBIO, Florida JEANNE SHAHEEN, New Hampshire JAMES E. RISCH, Idaho EDWARD J. MARKEY, Massachusetts TIM SCOTT, South Carolina CORY A. BOOKER, New Jersey JONI ERNST, Iowa CHRISTOPHER A. COONS, Delaware JAMES M. INHOFE, Oklahoma MAZIE HIRONO, Hawaii TODD YOUNG, Indiana TAMMY DUCKWORTH, Illinois JOHN KENNEDY, Louisiana JACKY ROSEN, Nevada JOSH HAWLEY, Missouri JOHN HICKENLOOPER, Colorado ROGER MARSHALL, Kansas Sean Moore, Democratic Staff Director William Henderson, Republican Staff Director C O N T E N T S ---------- Opening Statements Page Cardin, Hon. Benjamin L., Chairman, a U.S. Senator from Maryland. 1 Paul, Hon. Rand, Ranking Member, a U.S. Senator from Kentucky.... 3 Witnesses Goger, Dr. Annelies, Ph.D., Fellow, The Brookings Institution, Washington, DC................................................. 4 Greszler, Ms. Rachel, Senior Research Fellow, The Heritage Foundation, Washington, DC..................................... 14 Arensmeyer, Mr. John, Founder and CEO, Small Business Majority, Washington, DC................................................. 34 Faulkender, Hon. Michael, Ph.D., Dean's Professor of Finance, University of Maryland, Visting Fellow, America First Policy Institute, College Park, MD.................................... 42 Alphabetical Listing and Appendix Material Submitted Arensmeyer, Mr. John Testimony.................................................... 34 Prepared statement........................................... 36 Responses to questions submitted by Senator Hirono........... 69 Cardin, Hon. Benjamin L. Opening statement............................................ 1 Crosby, Mr. Phillip, CEO, Dan-O's Seasonings Statement dated June 8, 2022................................. 65 Faulkender, Hon. Michael Testimony.................................................... 42 Prepared statement........................................... 45 Goger, Dr. Annelies Testimony.................................................... 4 Prepared statement........................................... 7 Greszler, Ms. Rachel Testimony.................................................... 14 Prepared statement........................................... 16 Response to question submitted by Senator Risch.............. 67 Paul, Hon. Rand Opening statement............................................ 3 Risch, Senator James Statement dated June 8, 2022................................. 64 THE SMALL BUSINESS WORKFORCE CHALLENGE: CAUSES, IMPACTS, AND SOLUTIONS ---------- WEDNESDAY, JUNE 8, 2022 United States Senate, Committee on Small Business and Entrepreneurship, Washington, DC. The Committee met, pursuant to notice, at 2:29 p.m., in Room 428A, Russell Senate Office Building, Hon. Benjamin L. Cardin, Chairman of the Committee, presiding. Present: Senators Cardin, Cantwell, Booker, Coons, Hirono, Rosen, Hickenlooper, Paul, Ernst, Inhofe, Hawley, and Marshall. OPENING STATEMENT OF HON. BENJAMIN L. CARDIN, CHAIRMAN, A U.S. SENATOR FROM MARYLAND Chairman Cardin. The Senate Small Business and Entrepreneurship Committee will come to order. I want to welcome our witnesses today and thank you for your participation. As is the custom of our Committee, your entire statements will be made part of the record and when you are recognized you may proceed. We ask that you try to summarize your statements in about five minutes. Today's hearing will examine the workforce challenge that our Nation is facing, especially with regards to how it is holding back the prosperity and growth of America's small businesses. Small businesses employ nearly half of America's private sector workforce, and they are the driving force of innovation and growth in our economy. However, the deck is stacked against them in the competition for strong workers because they lack the resources and capital to offer wages and benefits that compete with larger companies, they have limited access to training and apprenticeship programs, and they often require in-person work at a time when many workers want flexibility. These historical challenges have been made worse by what economists are calling the Great Reshuffle. In February of this year, for example, 4.4 million workers quit their jobs, but more than half of those workers went on to find better jobs or an entirely different field of work. Small businesses are not only facing difficulties in attracting workers, but they also struggle to keep them, which is a further draw on the finite amount of time and capital that small business owners have. A study conducted by the U.S. Chamber Foundation found that high employee turnover cost small businesses as much as $3 billion per year. Those are resources that could be put into growth and innovation to boost our economy. If small businesses cannot find the workers they need, they cannot grow. According to Goldman Sachs' 10,000 Small Businesses Voices report, 97 percent of survey respondents reported that the difficulty hiring was affecting their bottom line, a 17-point increase from September 2021. Congress has a duty to our small businesses to support them as they confront these challenges because our economy can only go as far as our small businesses can take us. So our goal today is to explore the causes of these workforce challenges, the effects of these challenges, and solutions such as investing in workforce training, leveling the playing field between larger companies and small businesses regarding benefits employees receive, and increasing the size of our workforce. Unlocking the potential of the current workforce through job training is one way to help meet the needs of small businesses. As we know, a four-year degree is not a requirement for every career path and there are many highly skilled occupations that are better served by an apprenticeship or similar model. There is already a model for these kinds of partnerships, and many community colleges in Maryland, including Prince Georges Community College, have earned a national reputation for their apprenticeship programs. However, these programs can be difficult for small businesses to access, so we must take a hard look at how to connect these programs to small businesses. President Biden's American Rescue Plan also provides a model for how the Federal Government can work with state and local governments to deliver job training resources to the communities that need it the most. In Baltimore, for example, the city will invest $3.8 million in ARPA funds to provide critical workforce development training to residents, including summer jobs for young people and occupational training in high demand fields. For a small business to grow, we must level the playing field between larger companies and small businesses regarding benefits offered such as paid leave. In Maryland, Democrats in the Maryland General Assembly recently passed legislation to provide 12 weeks of job-protected paid leave to the employees of any organization with more than 15 employees. The law requires the State to establish an insurance program funded by contributions from employers and employees, including sole proprietors. The program will allow workers to take 12 weeks of paid leave for any family or medical emergency and could help small businesses compete with larger companies for employees. As a former Speaker of the House in Maryland, I know that our statehouses nationwide are the laboratories of democracy. I will be following the implementation of this law closely, and I am hopeful that it could serve as a model for how the Federal Government can assist small businesses to combat these workforce challenges. We must also assess how we can increase the overall size of our workforce through innovative policies. Unfortunately, due to the Trump administration's immigration policies, we now have some catching up to do. Between 2016 and 2020, annual immigration to the United States was cut in half, which robbed our economy of more than 2 million additional workers today had immigration kept pace with the 2016 levels. The effects of our immigration labor shortages are acutely felt on Maryland's Eastern Shore, which is reliant on workers for the H-2B visa programs during busy crabbing season. The prolonged H-2B visa shortage does not only threaten individual businesses but entire communities in my home state. By evaluating how to empower immigrants to participate in the workforce, Congress can make it easier for small businesses to find workers and easier for workers to immigrate to America. We can also increase the size of our workforce by investing in returning citizens. Nearly 600,000 Americans are released from prison annually, and despite evidence showing that they make excellent, loyal employees, they are often not included in the workforce development policies and programs that can equip them with the skills they need to succeed in the workforce. Investing in training returning citizens would not only help provide stable employment opportunities for them but also help small businesses looking for workers. If the COVID-19 pandemic has taught us anything, it is this: The problems that small businesses face are difficult but not intractable. And addressing them will take focused, intentional, and concerted effort, but they are not insurmountable. The pandemic also confirmed that solving these challenges requires a multifaceted approach because there is no single solution. So I am looking forward to hearing more from our witnesses about steps Congress can take to address all aspects of our Nation's workforce challenges to unleash the growth potential of small businesses and the immediate and long-term needs. With that, I recognize my distinguished Ranking Member for his opening comments, Senator Paul. OPENING STATEMENT OF HON. RAND PAUL, A U.S. SENATOR FROM KENTUCKY Senator Paul. Small businesses are struggling under the heavy burden of regulation and taxes. For the last several years, government policies at the Federal, state, and local levels have subjected our Main Street businesses to restriction after restriction. These onerous regulations, coupled with $6 trillion in government spending, have thrown the economy into a freefall. First, it was the lockdowns. Government forced small businesses to close indefinitely. Then, when they were finally allowed to reopen, they were saddled with capacity restrictions, mask mandates, and vaccine requirements for customers. While these government dictates did nothing to change the trajectory of the virus, they forcibly closed nearly 10 million small businesses, many permanently. The government's so-called solutions did not stop at public health. Congress doled out trillions of dollars in taxpayer money, the Fed ran the printer 24-7, and government paid people who decided they did not want to work nearly $800 billion from March 2020 to July 2021. It should be no surprise to anybody that labor force participation is at its lowest point since the Carter administration. Despite countless warnings, government, Congress, poured even more gasoline on the fire. Even economists like Larry Summers and Jason Furman, who worked for Democrat administrations, agree President Biden's $1.9 trillion so-- called Rescue Plan was too large and has caused the rampant inflation we are now encountering. Only now, Treasury Secretary Janet Yellen, who refuses to testify before this Committee, admits she was wrong in calling inflation a small and manageable problem. If she had not been deliberately blind to the predictable result of unrestrained, reckless spending, we might have avoided the economic pain the Biden administration inflicted on every American family. And to add insult to injury, President Biden's anti- domestic energy policies have created five to seven dollars per gallon gas prices, which have roughly doubled since he took office. No matter how many times the Biden administration blames the War in Ukraine or so-called greedy corporations, the truth remains; inflation comes from the Federal Reserve creating money to buy the exploding U.S. debt. One would think, in the face of such profound failure, politicians in Washington would show some humility. One would think they would consider the possibility they do not know economics better than economists or business better than the small business owners of America. Maybe, just maybe, problems created by excessive government spending and intervention cannot be solved by more government spending and intervention. We cannot look to the same people who created this problem for a solution. Those who think small businesses are telling us they want more government spending on ineffective Federal job training programs are not paying attention. What small businesses need is freedom. The free enterprise system has created more wealth and prosperity than any government program ever could. Let us let small business owners do what they do best without government getting in the way. Chairman Cardin. Thank you, Senator Paul. We will now go to our witnesses. We will start with Dr. Annelies Goger, who is a fellow at the Brookings Metropolitan Policy Program at Brookings Institution. Her work as a fellow involves researching and developing policy solutions to increase economic opportunities and decrease work inequality. Since 2019, Dr. Goger has focused heavily on researching ways to reform unemployment. I am informed that you are a recent new resident of Maryland, and that is the reason you are going first. STATEMENT OF DR. ANNELIES GOGER, Ph.D., FELLOW, THE BROOKINGS INSTITUTION, WASHINGTON, DC Dr. Goger. Thank you, Chairman Senator Cardin and Ranking Member Senator Paul and members of the Committee. It is an honor to testify before you today about the challenges facing small businesses. My name is Annelies Goger, and I am a fellow at Brookings Metro, and my specialty is in U.S. workforce policy, inclusive economic development, and global supply chains. This is also a personal topic for me because my father is a small business owner. He owns a lightning rod installation company with two or three employees, and he has consistently struggled to find and retain quality talent. I believe my father could have really benefited from more management training on how to more effectively manage his teams and reach out to pools of talent that he could not find. But for the last 30 or 40 years we have had a very lean approach to supporting small business ecosystems. And this, in a normal time, looks like a Darwinian survival of the fittest, but in the pandemic it quickly devolved into a Squid Games scenario. And the carnage was all around us. The temporary relief that was provided helped avoid some of the worst effects of this carnage and helped to prevent this from cascading into the rest of the economy. But today, small businesses, as you have both noted, really face major challenges with workforce as a massive pain point, and I believe we need to do more to think about how we can support a vital ecosystem. So what is causing this pain? I would argue that it is actually a complex perfect storm of factors, some of which were pandemic-related, but some are actually longer-term trends. The pandemic trends including immigration, lack of child care-- actually, 256,000 Americans of prime working age passed away from COVID, so there are those workers that we unfortunately no longer have. Also, the reallocation that happened as things like hospitality completely collapsed and then there was massive growth in things like warehousing, that reallocation of workers and matching employers, there is a lot of friction there, and it takes a lot of time to resolve. But there are also much more long-term shifts which include demographic shifts such as an aging workforce. The pandemic actually accelerated the retirement of many Baby Boomers, and the younger generation of workers is not only a smaller pool, but it is a much more diverse pool. Historically, we have underinvested in Black and Latino or Hispanic talent, and they have had less access to quality jobs and higher education. In addition, the Digital Age is going to create an ongoing need to keep people fresh, not just workers but also managers and manager training, and this is really costly for employers to bear as well. So what should we do about this? I think in the short term expanding immigration and including work visas, but also helping employers understand like extension services, to help them understand how they can reach talent that is on the sidelines, like the long-term unemployed, people with disabilities, people who were formerly incarcerated. That is something we can do. But I think in the long run we need to think about three things. One, employers in the Digital Age need to shift from being just consumers of talent to also co-producers of talent. So we have done some studies in my previous job on incentives to small and medium-size and large businesses to train their workers where they would be reimbursed for their training. What we found was that there is a sweet spot for medium-size in particular, 18 to 100, where investing in their training and subsidizing that leads to greater revenue and greater employment, but for small businesses they were actually harmed by these subsidies. And so I believe we also need to think about things like pooling costs and sharing training costs, which happens in some of the most mature systems where you have applied training. Finally, I think we really do need to expand that management and supervisory training and manufacturing extension to many more industries, such as the service sector. Number two, we need to rethink our talent model from programs--we have 43 across 9 Federal agencies, often duplicating efforts--to more of a systems approach. A systems approach is what small businesses can participate and act part of. They cannot create their own bespoke training programs. They just cannot afford it. Things like apprenticeships happen in a system in countries that do it the best. And finally, diversity inclusion is not about charity. If we fail to engage the talent, our diverse talent that makes up not just workers but also entrepreneurs, if we fail to get them off the sidelines and into our economy, we will fail to innovate, we will fail to have regions that are vital, and moreover, we will fail to really have an ``American Dream'' in this country anymore, where there is a level playing field for people that do not have wealth to access it. My father is approaching 70, next fall, and he has confided in me that he does not think he can retire fully. He has never had--for most of his adult life, he has not had health insurance even though he stands on roofs all day. I think really if we are going to think about creating the vibrant ecosystem that we need in this country to compete with China and other countries we need to think more about creating that level playing field and investing in our diverse talent. Thank you very much. [The prepared statement of Dr. Goger follows:] [GRAPHICS NOT AVAILABLE IN TIFF FORMAT] Chairman Cardin. Thank you for your testimony. Our next witness is Rachel Greszler. She is a senior research fellow at Heritage Foundation, focusing on retirement and labor policies such as Social Security, disability insurance, pensions, and worker's compensation. Her work focuses on policies that promote economic growth, individual freedom, and well-being. Before joining Heritage in 2013, Ms. Greszler was a senior economist on the staff of the Joint Economic Committee of the Congress. That is a good pedigree, coming from Congress. Glad to hear from you. STATEMENT OF RACHEL GRESZLER, SENIOR RESEARCH FELLOW, THE HERITAGE FOUNDATION, WASHINGTON, DC Ms. Greszler. Thank you. Thank you for the opportunity to be here today. Small businesses continue to struggle to find workers who are willing to work and who have the skills that they need. In fact, employers listed labor quality as their single most important problem every month between 2018 and 2021, with the exception of March and April 2020 with the COVID shutdowns. These struggles have gotten worse since the labor shortage. The current 11.4 million job openings equates to 1.9 jobs available for everyone that is looking for work. And yet, small businesses now say that inflation has become an even bigger problem than their workforce struggles, with 32 percent of small business owners reporting inflation is their single biggest problem. That compares to 3 percent in January 2021. Forty-year high inflation has created many struggles for businesses. Surging input costs means that contracts come in over budget, sometimes even at a loss. Employers have to increase workers' pay to keep up with rising consumer costs and to compete in a labor force that is now 3.2 million below its pre-pandemic rate. But this creates an inflationary cycle. When businesses have to pay workers more to do the exact same thing, they have to raise their prices. In April alone, 70 percent of businesses said that they increased their pay or they plan to increase it at the same time that 63 percent of businesses increased their prices. Higher wages have not made workers better off, though. The median worker has experienced a $3,300 wage increase over the past year, but inflation has eaten away that entire gain and actually left them $1,600 poorer. So what is driving inflation? The Federal Government's policies. Inflation is too many dollars chasing too few goods, and the Federal Government has simultaneously pumped trillions of dollars into the economy while restricting the supply of goods and services through policies that discourage or outright prohibit work. The Federal Government spent 45 percent more in both 2020 and 2021 than it did in 2019, and all of this is deficit-financed. About half of it came from the Federal Reserve printing money. The money supply has increased more over the past two years than it did over the prior ten. Most problematic was the $1.9 trillion American Rescue Plan, and it was enacted well after the recovery was underway and which included less than 10 percent going toward actual public health. The bulk of the American Rescue Plan was welfare expansions that exacerbated the labor shortage, private union bailouts that incentivized reckless behavior, giveaways to state and local governments that were already abundant in revenues, and $1,400 stimulus checks that fueled the inflation that has since eaten away their entire value. The Administration's proposed solutions to spend more and produce less are backward. Things like forgiving college loan debts owed by the most affluent Americans, enacting a child care entitlement that would drive up costs and crowd out providers, and taxing away the output and the innovation of the most productive parts of our economy will lead to something that is even worse than inflation; we will have stagflation. Moreover, when it comes to the unprecedented worker shortage and the workforce skill gaps, the government is the problem and not the solution. The government has effectively put up road blocks on all of the most efficient roadways to a more productive and robust economy and, instead, is directing traffic onto a congested toll road. Ongoing welfare without work benefits, including Obamacare expansions and SNAP expansions, are continuing to discourage work, particularly among young people. And, Federal COVID-19 vaccine mandates have made the health care workforce shortage especially pronounced, even life threatening, with health care employment lagging total employment by 263,000 jobs just since the mandates went into effect. Higher education subsidies and the Administration's cancellation of thriving new apprenticeship programs are preventing people from pursuing lower cost and higher quality education, and Federal job training programs have been failures. The WIA program is supposed to provide training for in-demand careers, but a gold-standard study found that only one out of three participants found jobs in their field of training. Politicians and bureaucrats cannot know businesses' needs better than employers themselves, so they should stop diverting people into programs that waste their time and taxpayers' money when private sector employers can, and are, providing more effective education and training. While the temptation for policymakers is always to do something, the best solution to fighting inflation and improving the workforce is to interfere less. Instead of building an expensive new highway, policymakers should simply remove the road blocks that are preventing people from getting where they need to go in the shortest time and at the lowest cost. Thank you. [The prepared statement of Ms. Greszler follows:] [GRAPHICS NOT AVAILABLE IN TIFF FORMAT] Chairman Cardin. Thank you very much for your testimony. Our next witness is John Arensmeyer, who is well known in our Committee, a frequent visitor. He is the founder and CEO of the Small Business Majority, a national organization focused on uplifting small businesses across the country while ensuring a diverse and inclusive economy. He works with the Small Business Administration and has led to the organization providing resources to 30 million small businesses and entrepreneurs. He previously testified in front of Congress and has worked alongside the White House to solve issues facing small businesses and the economy. Glad to hear from you. STATEMENT OF JOHN ARENSMEYER, FOUNDER AND CEO, SMALL BUSINESS MAJORITY, WASHINGTON, DC Mr. Arensmeyer. Thank you, Chairman Cardin, Ranking Member Paul, and members of the Committee. I founded the Small Business Majority 16 years ago to empower America's diverse entrepreneurs to build a thriving and equitable economy. We have a network of over 85,000 small businesses and 1,500 partners or partner organizations we work with. Before founding the Small Business Majority, I was the founder and CEO of ACI Interactive, an award-winning interactive communications company. So I have had a front row seat for challenges and workforce challenges faced by small businesses. The ``Great Resignation'' has spawned record numbers of new businesses, which is great. However, it has exacerbated workforce challenges. Small business owners have overwhelmingly cited labor shortages as one of the most significant challenges they face. According to a recent survey from Goldman Sachs, 87 percent of small firms report difficulties filling open positions. Our own polling has revealed that more than half of small business owners reported being negatively impacted by workforce shortages. Small businesses are doing what they can to address these problems. According to our polling, small businesses have taken measures to create more incentives for workers, such as increasing pay, increasing benefits, creating more part-time positions, and hiring younger staff. However, as emergency financial assistance has expired and additional support remains stymied by partisan politics, small firms await the resources they need to sustain a long-term recovery. A leading workforce barrier faced by small businesses is the ability to offer quality, affordable benefits commensurate with those offered by large firms. Since 2014, the Affordable Care Act has been an essential component of the small business ecosystem. Indeed, more than half of the ACA market participants are small business owners, small business employees, and self-employed Americans. The American Rescue Plan has helped to fill the coverage gap by expanded tax credits. However, if Congress fails to extend these benefits, those who work in small businesses will find it difficult to maintain health care coverage commensurate with that offered by large firms. Similarly, many small businesses do not have the resources to offer paid leave benefits the way large companies do and are looking to the Federal Government to step in with the kind of paid leave programs that exist in every other developed country in the world. Likewise, access to quality, affordable child care is essential if we are to address workforce instability. Women, in particular, have been forced out of the labor pool due to lack of access to affordable child care during the pandemic. More than one-third of small business owners with children reported that a lack of access to affordable, high quality child care was a barrier to starting their businesses and hiring employees. Congress must expand tax credits for child care expenses that would allow working parents to receive a percentage of child care expenses as a tax refund. The pandemic has highlighted the importance of wealth building including saving for retirement. Unfortunately, many small businesses do not have the resources or the administrative capability to offer retirement benefits. We must expand State Secure Choice Savings Programs that provide an easy on-ramp for employees to save for retirement while ensuring that self-employed individuals have access. I also want to touch on two essential workforce pools that are underutilized. The first is immigrants. Immigrants are highly entrepreneurial, launching small businesses at over twice the rate of native-born Americans. Moreover, throughout our history, immigrants have filled essential labor needs. We must pass comprehensive immigration reform. Alongside that, we must expand H-1B visa programs to allow more visas for skilled and low-skilled foreign workers while decreasing the waiting period for rejected applicants. Also, justice-impacted individuals that the Chairman referenced, second-chance hiring opens an enormous untapped talent pool for small employers. Research has shown, and anecdotal evidence in our own network, that most employers hiring justice-impacted individuals have positive experiences and notably lower turnover rates. Some of the tools and resources needed include occupation licensing reform, implementing clean slate procedures, and creating materials that will educate small businesses on the benefits of second- chance hiring. Finally, as has been discussed here, we must invest more in helping small businesses access the resources they need to train a skilled workforce. An example of this is the Lifelong Learning and Training Account Act that was reintroduced earlier this year. To conclude, more than two years into the pandemic, small businesses are slowly rebuilding, but they need a vibrant, stable workforce to fully recover. I look forward to your comments and questions. [The prepared statement of Mr. Arensmeyer follows:] [GRAPHICS NOT AVAILABLE IN TIFF FORMAT] Chairman Cardin. Thank you very much for your testimony. Our final witness is Dr. Michael Faulkender, who is the Dean's Professor of Finance at the Robert H. Smith School of Business. He joined the University of Maryland in 2008. And I am sure everybody here knows University of Maryland is the home of the national champion men's lacrosse undefeated season. You all knew that. Senator Hirono. Hanging on the edge of my seat. Chairman Cardin. It was never in doubt. Dr. Faulkender left that role at the beginning of 2019 to serve as the Assistant Secretary of Economic Policy at the U.S. Department of Treasury. During the COVID-19 pandemic, he assisted in negotiating the CARES Act and was the senior Treasury official who led to the implementation of the Paycheck Protection Program, and I remember being in rooms with our witness as we were trying to implement this program. STATEMENT OF HON. MICHAEL FAULKENDER, Ph.D., DEAN'S PROFESSOR OF FINANCE, UNIVERSITY OF MARYLAND, VISITING FELLOW, AMERICA FIRST POLICY INSTITUTE, COLLEGE PARK, MD Dr. Faulkender. Thank you, Chairman Cardin, Ranking Member Paul, and Senators on the Committee. Thank you for the opportunity to speak with you today on the challenges America's small businesses are confronting as they look to meet their workforce needs. As the Chairman said, I am a finance professor at the University of Maryland. I also serve on the Advisory Board of the Maryland Small Business Development Center, and I am a visiting fellow at the America First Policy Institute. During the Trump administration, I had the honor of serving as the Assistant Secretary for Economic Policy at the Department of Treasury. In that role, I worked very closely with this Committee and the Small Business Administration to quickly implement the Paycheck Protection Program. As a result of our exceptionally strong partnership, the unemployment rate peaked at just 14.7 percent in April 2020. My co-authors and I estimate that the first round of PPP likely saved as many as 17 million Americans from the unemployment rolls. The situation today, however, is very different from the depths of the pandemic. The current challenges confronting our economy are largely the result of overstimulation, particularly the American Rescue Plan. Excessive Federal spending has buoyed consumer demand, which has resulted in businesses struggling to find enough American workers to meet that demand. Absent sufficient supply, prices are rising at a pace not seen in 40 years. According to the National Federation of Independent Business' April 2022 report, ``32 percent of small business owners report inflation is their single most important problem in operating their business, the highest reading since the fourth quarter of 1980.'' While the Federal Reserve has belatedly started raising interest rates to curb inflation, policymakers must also focus on ways that we can increase the supply of available workers. To be clear, the pace of jobs recovery from the depths of the pandemic has been impressive. Largely as a result of vaccines generated by the Trump administration's Operation Warp Speed, we have already recovered more than 96 percent of the 22 million jobs lost from the pandemic recession. For context, it took more than six years to fully recover the jobs lost during the 2008 financial crisis. That said, we are still 822,000 jobs short of where unemployment was in February 2020 even though our population has grown by nearly 4 million. While the unemployment rate is low, labor force participation is still more than 1 percent below pre-pandemic levels. At the same time, households are flush with cash due to the $4.6 trillion in total COVID resources authorized by Congress. With all of that cash boosting demand, the employment needs of our Nation's businesses have expanded. The result is more than 11.4 million job openings at the end of April, just below the record set in March. Today, there are nearly two job openings for every one unemployed person. America's small businesses are struggling to fully serve their customers' needs. According to data from ADP, while large and medium-size enterprise continue to grow, employment at firms of fewer than 50 employees has declined this year. Looking at the April survey of small business owners, ``59 percent reported hiring or trying to hire in April'' and ``93 percent of those reported few or no qualified applicants for the positions they were trying to fill.'' The fundamental problem is that we have a labor shortage. Our focus should be on implementing policies that will bolster supply, including increasing the size of the domestic labor force across the skills distribution. First, we must stop providing prime-age, able-bodied adults excessive amounts of cash payments and social services detached from work requirements. The Biden administration has proposed eliminating work requirements from eligibility for child tax credits and has opposed recent state-requested Medicaid waivers that have work requirements. Recent work authored by researchers at the University of Chicago examined the child tax credit proposal and estimates that ``this change in policy would lead to 1.5 million workers to exit the labor force.'' Second, we should reduce the regulations associated with obtaining the training and experience that workers need. The U.S. Chamber of Commerce Foundation estimates that, quote, small businesses pay on average $11,700 per year per employee in regulatory costs, and the costs of regulation to small businesses with 50 employees or less are nearly 20 percent higher than for the average firm, end quote. Examples to include these--examples to reduce these regulations include ensuring that the Department of Labor does not micromanage apprenticeship programs and by eliminating the excessive occupational licensing requirements that many states have imposed. Further interference by the Federal Government is not the solution. There are already too many overlapping state and Federal job training programs that do not provide the skills employers are looking for. Third, we should re-examine the work disincentives in Social Security. While retirement age has risen over time from 65 to nearly 67, but early benefits start at age 62, those benefits are subject to reduction if people work. For example, somebody age 64 who has started taking benefits but makes $30,000 from working would see their Social Security benefit reduced by more than $5,000. The current Social Security structure tends to discourage Americans from continuing to work at a time that our labor force is too small. Finally, our immigration system should be more skills--and merit-based. The current high-skilled visa program needs to be reformed so that we are selecting those that possess the highest skills needed to grow our economy. I look forward to participating in this important conversation. Thank you. [The prepared statement of Dr. Faulkender follows:] [GRAPHICS NOT AVAILABLE IN TIFF FORMAT] Chairman Cardin. Again, we thank all four of our witnesses. We will now start five minute rounds. Before the pandemic, we had hearings in this Committee, and the challenges for small businesses getting trained workers was one of the top three issues mentioned as concerns for small businesses and growth. So we had a significant challenge for small businesses getting quality, trained workers. When we created the Paycheck Protection Program, during the early parts of COVID-19, one of the main objectives was to allow small companies to be able to maintain their workforce because we knew if they had to lay them off it would be more challenging to bring that workforce back because small businesses would be, again, at a disadvantage at getting the most trained workers. So we recognized this issue. Now the pandemic has made it worse. The labor shortage today has made it much worse. I will give you one example, though, in regards to government programs. We have surveys from the National Restaurant Association about the challenges restaurants are having in being able to attract workers with the current labor market and the cost of labor. And those that received the Restaurant Revitalization funds are in a position where they can keep their workforce; they can get the workers. Those who did not receive it are having a much more difficult time competing, just mentioning the fact that there is an affordability issue here in addition to finding trained workers. But several of you mentioned that small businesses do not really have the capacity to be able to have a training program. They do not have that. You have to have a shared effort. We have lots of training programs at the national level. I am familiar with some of the apprenticeship programs, but it is difficult for a small business to get engaged in an apprenticeship program. If you are a large company, you have a much easier time connecting with those that have the apprenticeship programs. So, Dr. Goger, let me start with you. How can we tailor these training programs so that small businesses can really be engaged as they partner to be able to get a trained worker to meet their needs? Dr. Goger. That is a great question, Senator Cardin. The issue, like I said, is that we have programs and not systems, and so that means if you look at the gold standard places, where these earn-and-learn ecosystems work well, you have a clear role of the education provider that takes some of that training burden off the employer. You have a clear role often of an intermediary that helps connect the learner and the employer. Right? And then you have employers that have a clear role, which is to engage in a longer-term strategy of training a professional. Right? So we often treat apprenticeships like they are these bespoke programs. And the issue with that is like if I ask my dad, why don't you start an apprenticeship, which I have, the answer is, well, in lightning rods, he does not have a curricula for that. He does not have a registration--he cannot access that registration process. It is super cumbersome for him. What if we had a mechanism where all the other lightning rod providers could get together and work with educators to build that competency-based pathway and then he participates in that? On the job, he trains to that structured pathway. They all agree, and periodically they reassess that process. It takes the burden of creating that whole thing from scratch off of his shoulders. And in the long run, once it is all set up--you have an up front investment, a public sector investment. But in places like Switzerland, employers get an 8 to 11 percent return on investment, and that is because some of those heavier costs around who does the educating and all that, that is not on the small business' shoulders. So I think that business model is really critical to thinking about, and I also think the cumbersome nature of our registration process--you know, we do not have connections between apprenticeships, CTE, community colleges. These are all separate silos instead of a unified system that employers can engage in. Chairman Cardin. Mr. Arensmeyer, let me ask you, what would you like to see Congress do to make it easier for small businesses to be able to access training programs to be able to get trained workers? Mr. Arensmeyer. Well, I think Dr. Goger said, and the literature all shows, that these programs, they work well when you are dealing with big companies. But like everything else in the small business world, small businesses do not have the capability to navigate, you know, complicated bureaucracies. They do not have the time to independently pursue, whether it is connections with community colleges, directly with training programs, and they need--we need to consolidate these programs, and we need to improve the education and information that is provided to small businesses about how to access these programs. I think sometimes the programs are--you know, if they are sort of looking to get the biggest numbers of impact, they are going to go to a big business. They are going to be able to deal with one HR department, and they are going to be able to get those numbers. But that does not solve the problem of the many small businesses out there, so I think it is a question of streamlining a system and making it accessible to small businesses. Chairman Cardin. Thank you. Senator Paul. Senator Paul. I am going to reserve my time and pass it down to another member on my side, if I could. Chairman Cardin. Certainly. That would be? I think it is Senator Inhofe. Senator Inhofe. It is. Okay. Thank you, Mr. Chairman. There is no state that is more dependent upon the issues that are brought in this Committee hearing, and this is the reason I got on it in the first place. I hear regularly from small businesses in Oklahoma because we have got a lot of them. Their margins are shrinking, and I think we can speculate as to why, and it is pretty obvious. In April, inflation was up 8.3 percent, and the average American family is spending an extra $569 every month just to buy basic necessities. And on top of this, businesses everywhere are raising wages and offering more benefits simply to survive in the labor market, but it is still not enough. So, Ms. Greszler? Is that right? Ms. Greszler. Correct. Senator Inhofe. Yes, I would like to have you--right now, we are undergoing this multi-trillion-dollar spending spree, and the effects that has on small businesses is debatable. You touched on this in your opening statement, but I would like to have you elaborate as you wish. Ms. Greszler. Yes. So the spending spree has resulted in one out of every three dollars that is in circulation today having been printed by the government. That has massively expanded the amount of demand in the economy, and at the same time, we had welfare without work benefits that were restricting the supply of workers. And so it just created this huge gap. As a result of that, businesses cannot get the workers, and they are in this inflationary cycle here. We have to stop the spending immediately. That is one of the first things, and then I think we get toward the longer term goals because workforce has been an issue for years and we have, in many ways, a broken higher education market. Senator Inhofe. Yes. The spending is something I wanted to get to because that is something that is not talked about as much. And I would say to Dr. Faulkender, very similarly--and you touched on this in your opening remarks, but . . . how can this Administration advocate policies--obviously, they are not doing it right now--that would help level the playing field for small businesses? Dr. Faulkender. Thank you, Senator. I think some of the most important things that we can do is reduce, as was stated, some of the spending but also some of the regulation that is being imposed on small businesses. Organizations that are operating at smaller scale, but nevertheless have the same regulatory requirements, have fewer workers to spread those costs over. It makes it more expensive per worker, and as a result, we are seeing that small businesses are struggling more than others to retain workers. Likewise, as the Chairman mentioned, larger businesses have greater ease in providing telework, for instance, for their employees. And so anything we can do to make the environment for small businesses more competitive by reducing some of the costs that we impose upon them and some of the threats of higher taxation that we are imposing upon them would be beneficial to assist the small businesses. More than anything, we need to increase the number of workers in the workforce. There just are not enough people that are looking for jobs relative to the number of openings right now, and so reducing the disincentives of being part of the workforce, I think, is the singular most important thing that we can do to help fill those employment gaps. Senator Inhofe. It is kind of interesting because I am older than any of you guys are and I can remember it was not that long ago when we thought we would love to have a problem like this someday. And now it is here, and we are not so sure about it. But I think it needs to be said over and over again by knowledgeable people, such as we have here today, on this overspending, overregulation, the damage that is being done, and I appreciate your witnessing. Thank you, Mr. Chairman. Chairman Cardin. Senator Hickenlooper. Senator Hickenlooper. Thank you, Mr. Chair, and I appreciate this importance of having someone on the panel who has a family experience with lightning rods because I think it is fair to say that Senator Paul sometimes acts as a lightning rod and has frequently said that I act as a lightning rod. So I think it is appropriate in some important way. I was in Colorado last week and met with a group of students in one of our mountain towns to discuss the success of a program I started when I was Governor, called CareerWise, which is an apprenticeship program. And one of the students, his name was Brandon--and he had worked for the previous three years as he was working his way through high school, with a construction company, and he had actually decided he was going to go to college. He was not going to, but now he was going to go to college, but he was going to continue working for the construction company. He is a project supervisor at the age of 19. Anyway, he is going to continue to work for them as he goes through a degree in architecture. He made a challenge to us. He said, what are you going to do to make sure every kid has a chance to get meaningful work experience while they are still in school, before they actually go out and get a job? So his challenge was: What are you going to do to get every kid this opportunity? So what more can the Federal Government--Dr. Goger, I will start with you. What more can the Federal Government do to pair small businesses and younger Americans with these kind of experiential learning opportunities? Dr. Goger. That is a great question, Senator Hickenlooper, and really we need to start much younger. We need to start in K-12. We should be taking 11-year-olds to meet mentors because information asymmetries about what you can do in your job are huge. People do not know. Jasmine Hill, a professor at UCLA, she calls it mobility knowledge. They do not know what the options are. There are so many well-paying jobs that are not being filled purely because people do not have someone in their family that works there and therefore can tell them how to access it. Right? So as the first in my family to go to college, there was a lot of that mobility knowledge that I did not have, and I think we need to be taking a more proactive role going into schools and in K-12 curricula starting early with opportunities to get work experience. Right? Our average apprenticeship age is 26. We should be thinking about 16. That is where our young talent really is. And I think one of the things--if you want to get to specifics, one of the things that we really need to think about is guidance counselors and teachers. What do they know about the career opportunities available to young people? A lot of times, you know, be a lawyer, be a doctor, go to college. That is pretty much all people here, but I think there is a lot more options for the two-thirds of Americans that do not end up with a college degree. Second, we need some permanent funding streams for intermediaries that do that connection, like CareerWise, between the young person, the employer, and that can provide some support. Let us say the young person needs transportation. That is the connector that we do not have permanent funding for. Three, we need funding for related instruction. Right? So if you are going to have someone learning that in the class, ideally, you have some time in the classroom and some time on the job. It is a structured program. In the classroom, you learn--you know, if it is an electrical program, you learn the theories around like nodes of electricity. Right? But on the job you figure out how to actually solve the problem. And that is where the soft skills get built. That is where someone builds that professional network. So I think that we need to really make sure that we are structuring the incentives in K-12 and community colleges so that education itself is creating multiple pathways for people and not just a college-for-all solution because you said an apprenticeship does not have to be a choice between a degree or not. In Alabama, they actually created the nation's first master's degree apprenticeship in social work in an HBCU. Senator Hickenlooper. Yes. And I agree with that completely. There does not have to be that match. I think it is also worth looking at how do we keep this skills learning going throughout a person's life. Kids of all ages are going to have to keep learning things. You know, a woman in Colorado started a company called Guild Education that now is that interface between--some of her customers are Starbucks and Walmart, where every single employee, when they want to pick up any packet of learning skills, the company will support them, and then Guild is the intermediary that allows them to make sure they get the right class and they finish it. If I can just get 30 seconds, I wanted to ask a little bit just about the visa application process, Mr. Arensmeyer, just because I see so much of this workforce. I mean, if we had a streamlined visa process, I think that could go a long way in a lot of these places where we have real workforce--I was a small businessperson myself, so I am painfully aware of the importance of this. Mr. Arensmeyer. That is absolutely true. I mean, some industries, like the hospitality industry and the construction industry rely on heavily on foreign-born labor. And along those lines, it is absolutely true we need to increase the H-1B visa program for high-skilled workers, but we need to expand it to low-skilled as well. Talking to small business owners across the country, they are lacking workers at every level. Senator Hickenlooper. Right. Mr. Arensmeyer. As I said, construction, hospitality, and other industries. So you know, we have grown our economy over the decades, over the centuries, with foreign-born workers. And we have constraints on that right now, and we are hearing from businesses across industries that that is a huge problem. So we need to, you know, responsibly ease some of those restrictions. Senator Hickenlooper. Well, maybe the next thing we will have a hearing on comprehensive immigration reform and work from that point of view. Anyway, thank you. I yield back. Thank you for being concise. Chairman Cardin. You are ambitious. Senator Paul. Senator Paul. I just wanted to interject on the immigration issue just very quickly. Senator Hickenlooper. I told you I was a lightning rod. Senator Paul. Well, here is the thing. We never do anything on immigration, and the reason is this, is people want the whole thing done or nothing. If you would break it into small pieces and look at the H-2A program, the H-2B program, or the employment-based visa program, there are fixes that both sides could come together. But the big thing is there are 20 million people here illegally. One side wants them to vote; the other side does not think immediately voting is a great idea if you came here illegally. That is a big bugaboo, and it has stifled us. I have a bill that doubles the employment-based visas. There is 1 through 5. And there is no reason why we should not be able to get bipartisan support on that and pass the bill. There are 70,000 employment-based visas, EB-1 through 5. I believe we ought to double it. I think a lot of Democrats would support that, but it has not gotten anywhere because everybody wants everything or nothing. I have another bill that takes the H-2A program--and the H- 2B are another category; they are capped. But H-2A is agriculture; it is uncapped. I would take some of the H-2B workers, put them in the H-2A, the uncapped, which would give us more workers, and they would now be called H-2A. It would be mostly like landscape workers, but it would be probably several hundred thousand landscape workers. You would move them over. And I think there could be bipartisan support for that, too. We take the H-2A program and make it work better by making the government respond to you within a certain amount of days. It is electronic. If you are bringing back the same workers, there is less work, and they run through the system much easier. We make it year-round. All these things are very practical that there is probably no partisan disagreement on. Not everybody is going to vote for it, but it is not a really, really pitched partisan battle. But we do not get to it because the sticking point is do we let 20 million people vote or 15 million people vote who came illegally. So I think if we got to smaller portions of this we might have a chance. And I will go back to the regular order. Chairman Cardin. We might differ a little bit the way you explained it, but I do agree that we---- Senator Paul. I am always right. [Laughter.] Chairman Cardin. But I do agree we need to make progress. Senator Ernst. Senator Ernst. Thank you very much, Mr. Chair. And thank you, Senator Paul. ``Bugaboo,'' that is the word for the day, folks. But I do want to chime in on some of the thoughts that have been expressed by our witnesses today and thank you all so much. And, Dr. Goger, I am going to agree about a phrase that I use all the time. It is: You only know what you know. Right? So we experience this throughout our population. You only know what you know, and you do need those examples out there. I am the first in my family to get a four year degree. My sister has a degree from a community college, and my brother is--he did not to go to school, and that is probably a good thing. But he is doing quite well because he had skilled training in heavy equipment, and he went directly into the workforce. He works for--he is a union laborer with the Burlington Northern Santa Fe rail line, and he operates heavy equipment for them. And out of all the three of us kids, he probably does the best. So there are just different types of opportunities for different individuals out there, but you are right; you only know what you know. And so to that, Dr. Faulkender, thank you so much for being here. I would like to say thank you because I do think we need to get more engagement in the workforce, and finding ways to do that is extremely important for so many small businesses that are really struggling. Some of them are closing their doors because they do not have workers. So we really have to do something about that. And Federal apprenticeship and job training programs are-- they exist in abundance, as you pointed out. I have actually worked for one of those job training programs at a technical college in South Carolina, but there are so many of them. So how can we put reforms in place, do a better job of maintaining those programs, getting the types of skills out there? What reforms would you recommend? Dr. Faulkender. I think first and foremost we need to make them significantly more flexible. You know, one of the things that I learned during the pandemic in running the Paycheck Protection Program is that we may think of businesses as operating a particular way, but when you are then rolling out a program nationwide you are exposed to the diversity of businesses out there and the different situations they confront. And the idea that we can create this one-size-fits- all and have it work for everybody just does not work if you start putting lots of constraints in place. We need to let businesses, states, municipalities have the flexibility to do it for themselves. And so for instance, when you have the Department of Labor put a lot of conditions on apprenticeship programs that then disqualify them from participation, that is going to make it more difficult for industries and businesses to find ways that work for them and their unique circumstances. So let us provide flexibility and otherwise get out of the way. Senator Ernst. And I agree 100 percent, and I am going to tout a program that I visited last week while we were on recess. I visited the John V. Hanson Career Center in Forest City, Iowa. It is a career center that is sponsored by the local community college and four of the high schools and obviously a very generous employer in the area. It did not take the Federal Government to come up with this career center, and it is very focused on the needs of local employers. And it allows juniors and seniors to go to the career center during their regular K-12 school time, and they are learning a trade and earning college credit at the same time through the community college. And these young men and women, they can either decide to continue on and transfer credits into a university, go on to the community college, or some of them are even being presented with job opportunities from local employers coming directly out of high school, debt-free, great paying jobs. So you know, I always hesitate to say, ``We are from the Federal Government. We are here to help'' because sometimes we just need to get out of the way and let those local decisionmakers, those local thought providers get in there and discover what is necessary and right for their own community and drive forward with it, and that is what the John V. Hanson Center has done. So I appreciate it. This is a really good discussion today, so thank you all very much for being here. Thank you. Chairman Cardin. Senator Rosen. Senator Rosen. Well, thank you, Chairman Cardin, Ranking Member Paul. This is a really good hearing. Workforce challenges, it is what we--we heard this before the pandemic. We are hearing it during. And now, hopefully, as we are moving through it, we are going to find some resolve. I want to say that I agree 110 percent with everyone here who says we have to get down through K-12. We have to excite young kids, show them that there is more than three jobs that they might see on TV or the internet, how they get there and what the path is for them and really empower those career counselors and all of those things in each one of our communities. And so we have spoken about training and mentoring for young folks, but we also have to talk about upskilling or reskilling our returning workforce, our midlife, perhaps, workers. And so ``help wanted'' is a sign we have seen in every window on the doors of small business over the past year. We hear from companies of every size and who are just facing unprecedented challenges filling the workforce. So in Nevada, even though the unemployment rate has continued to go down, only three in five adults are working or currently actively seeking work. And so the rest have grown discouraged. They have dropped out of the labor market, and quite a few have stayed at home to take care of their families, maybe children, maybe an aging parent as a caregiver. And so I felt that we had to create an on-ramp for those who want to join the workforce at that time, so I introduced what is called the STEM RESTART Act. It is bipartisan legislation to help Americans come back through what I am calling--what we are calling ``returnships.'' So, Dr. Goger and then Dr. Arensmeyer, how do you think we can create on-ramps for these mid-career workers so we can get them upskilled or reskilled and return to the workforce and help them in that way? A little different than our young kids K-12. Dr. Goger. Sure. I think that most training that happens, happens by employers, and we should be incentivizing especially mid-size employers to train and onboard workers more. When we did a study in California, we found that 18 to 100 was the sweet spot, where when you reimburse employers to train, that increased their revenue and increased their size. For smaller, though--for smaller employers, though, I think we need to think about how you can pool training costs, like community training centers, incubators, places where people know where to go when they are looking for that new job and they do not know where to start. Thank you. Mr. Arensmeyer. Well, I thank you for your--you know, there is a whole panoply of things that are in effect here. For women entering the workforce, child care continues to--maybe they have stayed home with the kids, the kids are off in school, but they still are going to need child care. And we hear constantly from employers that they struggle to keep and recruit women particularly, caregivers, because of the inability to access affordable child care. So the provisions in the Build Back Better Act to really reduce the cost of child care are absolutely essential. You know, we have talked about expanding opportunities for foreign-born workers in the system, justice-impacted returning citizens in the system. And, quite frankly, if you are bringing--if you are recruiting someone back into your small business, you have got to be able to pay the same level of benefits that a big business will, the competition. And so it is--you know, sort of the big four areas that we think are important: health care, pay level, child care, I have already talked about, and retirement savings. Really facilitating small businesses being able to offer commensurate benefits has been just a huge disparity across our system. So it is really--it is not one thing. It is really putting all of these together. Senator Rosen. Thank you. I know I have a few seconds left, so I just really want to reiterate what we have been talking about, about apprenticeships also because in Nevada we have over 90 registered apprenticeships where you earn while you learn, you graduate debt-free, average salary there about $70,000. We are trying to bring more apprenticeships. We have large swaths of openings in cybersecurity and technical computing, forensics, a lot of those things, trying to bring more of that registered apprenticeship capacity because we know that that works. And I just wanted to, like I said, in the few seconds left to say how much I agree with that, and I know that you are supportive of that, and I think it is important that we put our efforts into this to create a robust workforce. Thank you, Mr. Chairman. Chairman Cardin. Senator Paul. Senator Paul. You know, we have discussed a little bit of labor force shortages, and you know, I am a Republican who is for more lawful immigration, so I think that can be part of the answer. I do think there are certain aspects of the labor force shortage, though, that are perplexing. The argument has been made that the artificial stimulus of government spending and creation of new money by the Federal Reserve is part of it. It has created this enormous amount of demand, and that is part of the labor force shortage. The only problem with that argument is we still have not got back to the actual physical number of where we were before the pandemic. Now the government did really disrupt. We have never had a $20 trillion economy just closed and then reopened, so there are enormous dislocations. It is not only ours. Most of the world closed down and then reopened. But the other argument is that maybe it is an underuse or that maybe we have deterred people from work and quantifying those and making arguments for which is the case, that we have so much artificial demand that we cannot keep up with the workers because of the artificial demand versus a labor force that is not working. So we have labor force participation that is about 62 percent or so, and people say it is going down. The remaining 38 percent I am interested in. Does that include people that are disabled or cannot work? Or, when you do labor force participation--we will start with Ms. Greszler--are those people able to work, the 38 percent that are not in the labor force? 62 percent are participating; 38 are not. Who are the 38 percent? Ms. Greszler. Yes, so it can include those people that are not in the labor force. Part of that could be disability. Most of them are able to work. I have been digging into the numbers and trying to figure out who is it that is not coming back to the labor force. A particularly troubling part is that it seems to be the 20- to 24-year-old age group. The drop in employment is actually bigger than the net drop in employment for all workers. That is when people should be at their greatest opportunity, like they have all the potential in the world there. And they are not attending college in greater degree either. The college enrollment rates have declined. So that is a particularly troubling part of it. A narrative that is out there is that it is mostly women, especially women with younger children, who have been disproportionately impacted, and absolutely, child care is a struggle. I have six young kids and went through COVID, and it was not easy to work with them, all at home many times. But there have been some studies, multiple ones, including by Jason Furman, President Obama's former CEA chair, Claudia Goldin, and they basically found, yes, it was a struggle, but women pushed through, and it actually did not cause their employment to decline. I have been looking at this, and only 16 percent of the current gap in employment is parents with children. That includes men and women. And so I do not think that that is the big part there and we do not need to be enacting a big new entitlement that would drive up those costs of child care, but there are ways that we can help child care become more accessible and affordable and also have the types of jobs that work for women, that work for caregivers, that work for people at the older end of the age spectrum, that are particularly appealing to younger workers, and that is the independent contracting, the freelancing. We should not be shutting those opportunities out. Senator Paul. Did you say you have six young children? Ms. Greszler. Well, 4 to 14, so I consider them all young. Senator Paul. Six. Yes, my sister has six. She is an OB/ GYN. So I know what it is like to have a working sister with six also, so that is a big deal. You know, when you look at this also, one of the things we talked about was we were quite concerned, at least on our side, of adding the $600 extra in unemployment. And that expired back in September, and we thought, well, people will go back to work. And the worrisome thing is: Did we change behavior so much that some of them did not go back to work or some of them are working for cash on the side? Are they taking government money and working on the side? And you do hear stories of that, the people who are taking a little bit less from the government, then they are driving somewhere for cash, you know, in another city or something and not being reported. Mr. Faulkender or Dr. Faulkender, your response sort of to the previous question? Labor shortage in general, getting rid of the unemployment add-on, and why we still have a shortage. Dr. Faulkender. Right. So the other significant segment of missing workers are those in their 60s. So there is an early retirement that is going on, and this is why potentially some of the penalties of Social Security should perhaps be revisited because that is also a significant portion of the missing segment of the labor force. The technical answer to your question is we can look at different segments of the adult population, and prime labor force participation has mostly come back. It is still only about a half a percentage point below where it was prior to the pandemic. It is the older workers. So prime is 25 to 54. It is above that where we are seeing not a recovery. And so how much of that is extra concern about COVID versus how much of it is the savings that they accumulated, the run-up in their retirement portfolio facilitated them leaving but also some of the penalties associated with Social Security, associated with doing--taking Social Security and working at the same time? Unfortunately, the high levels of inflation we are seeing may push some of those people back into the labor force, but I do not think that is what we--I do not think that is why we want them back in. Ms. Greszler. If I could just add that eliminating the retirement earnings test would not cost anything, it is actually just kind of misperceived tax. You get the money back later on. So it would actually be pro-growth and improve Social Security's finances. Chairman Cardin. Senator Coons. Senator Coons. Thank you, Chairman Cardin and Ranking Member Paul. Thank you to our witnesses today. I have heard from a number of businesses up and down my home state, the small State of Delaware, that they are indeed in the middle of a significant labor shortage but also a skill shortage in that hiring and retaining and motivating folks who have the appropriate skills for the jobs for which there are opportunities is a real challenge. So, thank you. If I could, Dr. Goger, you said in your testimony that apprenticeships should be easier and cheaper for small businesses to sponsor. The apprenticeship model is well known in the building trades and other well-established industries, but my former governor, Jack Markell, launched and ran a statewide program to help create registered apprenticeships in high-growth, high-potential sectors, really driven by employers in partnership with our community college. What barriers do small businesses face in managing a registered apprenticeship program, and do you think government investment in apprenticeships can actually help alleviate this issue? Dr. Goger. That is a great question. The challenge for a lot of small businesses--because, as I said earlier, we have a program approach that essentially requires an employer to create a bespoke program customized for their business themselves. And instead of creating a system whereby--for example, in technology, I have done a lot of work on apprenticeship in tech. If you could partner with community training providers and community colleges to provide some of the actual structured education, that takes some of the cost burden off; if you have some subsidy also up front for the design and training your managers on what is your role here, what is expected of you, and how long this is. I think one of the challenges that we hear from small businesses is that they tend to think about the cost in a short term way. You know. And I had an intern. Right? I had her for three months. I spent two months trying to train her, and then she had two weeks of actually helping me. If I could have kept her longer, then I would have seen that real return on investment coming out. And I think a lot of times there is a mindset issue, where employers are seeing these talent investments as a short-term cost and not keeping it long enough to actually see the recoup of that cost. So I think structuring it longer is better for the employer, actually. Senator Coons. I do think that government has a role to play as an aggregator of demand. Most of the small manufacturers, small and medium manufacturers I meet with in Delaware need four people with these skills or six people with these skills or ten people with these, but not enough to have them pay the money up front to design and register and run an apprenticeship program long-term. I do have a bill, surprise, with Senators Young and Moran and Brown, the Apprenticeship Hubs Across America, that would expand the registered apprenticeship model, specifically the high-growth job market, and increase the availability of apprenticeships in a diversity of businesses like high tech, like hospitality, like home health care, that do not currently have any registered apprenticeship programs. Mr. Arensmeyer, in your testimony, you spoke about the need to equip small businesses with workforce training resources. And I think workers ought to have the ability to advance their own skill and small business employers benefit when workers get the opportunity to improve their skills. Why should government make any investments in skills? I have a bill that would create essentially a tax-preferred savings account with a match up to a modest amount for those who are low- and moderate-income. Why should government make investments rather than employers in skills training? Mr. Arensmeyer. I presume you are referring to the Lifelong Learning and Training Account Act? Yes, I was going to mention that actually because it does allow for government to match savings that employees can put into a fund and use it for when they need to for training. I think it is essential that we--you know, there is a public policy behind making sure we have got a skilled workforce out there and--you know, this is a matching. This is a way the government can leverage its money. It is not 100 percent. It is not covering 100 percent of the need. It is matching. And, look, we do this across our entire economy with tax benefited health care, with tax benefits for retirement savings. So this is really no different. This is the government, you know, strategically using its resources to step in and, you know, in a targeted way have a positive impact. Senator Coons. How do you think providing a training opportunity like that would help with retention and morale in the workforce more broadly? Mr. Arensmeyer. The training, specifically, the training that is in your bill? Senator Coons. Yep. Mr. Arensmeyer. Well, it would be--it enables us to have a more stable, skilled workforce that--then it enables the people who get this training to put themselves into position to do that job and then do other jobs and increase their responsibilities in the economy, and you know, you end up with a much more robust workforce by doing that. Senator Coons. Great. Thank you. Thank you, Mr. Chairman. Chairman Cardin. Senator Hirono. Senator Hirono. Just in time, it seems. I apologize if any of these questions have been asked, but here we go. So, Dr. Goger, am I pronouncing your name correctly? Dr. Goger. Yes. Thank you. Senator Hirono. So you mentioned the need for child care because I think that just as we are having a really hard time finding workers, if we are not providing accessible, affordable child care that means that there are a lot of women, especially those who because of the pandemic left their work--but they need child care provisions to get back to work. So can you just tell us a little bit more about any stories about women who because of lack of child care they are not able to get back to the workforce? Dr. Goger. Yes, so what we saw is not only were women more likely to be laid off in the pandemic because they are concentrated in frontline jobs but also, you know, because of school disruptions. Even today, my friend last week--she has two girls. Her daughters' school was shutdown because there was a COVID exposure. So this impacts parents generally but predominantly women, and I think that it is really challenging for women employed in small businesses, like hospitality, because they cannot really juggle these uncertainties and keep their job. So that is why one of the things that I was talking about is how could you pool funds from small businesses, through trade associations and so on so, that you can do things like share some of the costs for child care or get small businesses together to reduce health insurance costs or to be able to offer paid sick leave. I think that, structurally, small businesses cannot afford a lot of these benefits, and that is what is leading them to lose talent to larger companies. And so I see that as really essential to being able to help women stay and be able to show up in the workplace more regularly even in the face of ongoing disruptions. Senator Hirono. I agree with you that in spite of the testimony that says that government should not be involved--in fact, some of our panelists apparently take the position that the less government does to try to be of help the worse things are, and I do not agree with that position. So to the extent that a lot of the women in our workforce are more in the frontline positions, we lost a number of them to COVID, and so I do think that as a developed country we are very much behind in terms of child care support and also paid family leave, that those things would help a lot. So with regard to the supply chain, the COVID-related supply chain disruptions have been driving price increases in the U.S., which have disproportionately impacted working and middle-class families, and we know these families are paying more for everyday household goods like groceries, food, rent, utilities, gas. And the Build Back Better included investments to address supply chain vulnerabilities, but it has stalled in the Senate. What kinds of investments should we consider to improve supply chain resiliency in the United States? Do you have any thoughts? For you, Dr. Grover. Dr. Goger. Doctor--Okay. Senator Hirono. Sorry. Goger. Dr. Goger. Yes. This is a really long-running challenge because for 40 years we have actually incentivized lean supply chains that do not have resilience built in, and so we have disinvested in our domestic manufacturing capacity---- Senator Hirono. Yes. Dr. Goger.[continuing]. Including small businesses. We do not have managerial expertise right now in our supply chains to actually respond quickly to changes. And we really need an agile workforce that can learn and change and adapt, and that is why I think employer-provided training is so critical, especially for small- and medium-size businesses that are the source of a lot of the innovation that we see. In many cases, it was small businesses that adapted the most quickly to some of these demand shifts. But I worry that the risks and the costs of all these disruptions will be with us for a really long time unless we can really start to use, you know, really concerted efforts to invest back in building that small business ecosystem and getting some of our diverse talent, you know, and diverse entrepreneurs, their ideas. Some Harvard researchers estimate that if we invested more equally in our talent we would quadruple innovation in the United States. We do not have a lack of people or a lack of ideas or a lack of talent, but we are keeping people on the sidelines, so we need to remove some of those barriers for innovation. Senator Hirono. I think you also mentioned in your testimony that we are not investing equally in Black communities and Hispanic communities and we are losing out a lot on the talent provided in these communities. I agree with you. Thank you, Mr. Chairman. Chairman Cardin. Thank you, Senator Hirono. Once again, I want to thank all four of our witnesses. This has been a very, very helpful panel, different views, but I think we all recognize the fundamental problem for small business today is access to trained workers and a stable workforce. We have had hearings dealing with the challenges small businesses have with capital, small businesses have with dealing with supply chain disruptions, we had a hearing on that, to deal with the regulatory burdens of small business. But today, we really are concentrating at this hearing on the issues concerning labor force, and there is no simple answer to this. I think you all have really given us some really good suggestions. We have programs that deal with job training and apprenticeship, but it is very difficult for a small business to access those programs in a useful way that could be relevant to their current needs. So how do we fine- tune these programs to make sure they are accessible to small businesses? There seems to be a growing consensus, as Senator Paul indicated, on easing the immigration rules, certainly as it relates to worker visas. I would point out that the general immigration policies are just as important. The replenishment of our workforce through normal immigration is important for us to have a supply of workers in this country, not just those that come under the worker visas. And we do need to deal with returning citizens. That is a significant number of people who have been disqualified in so many opportunities that are really able to work, want to work, and can be very reliable workers for themselves and for our economy. And then we get to the issues of affordability to work. We have mentioned that. Not only child care but health care has been mentioned. These are areas that we have to continue to make sure we have a level playing field for small businesses so that the workers--the businesses are not put at a disadvantage with the workers that are available and can provide the necessary incentives for them to work. One other area that we have not talked about, just put it on the table, is resource partners. We have invested a lot in our resource partners, and they should be able to help provide some of the services to make it easier to connect the dots between the services that are available but that small businesses do not have the capacity to be able to work through how they get to those services. So I think there is a lot of good suggestions that have come out of this hearing, and I can assure you we will be following up on this. And once again, we thank you for your being here today, but we are not going to let you off the hook. We expect that we will be continuing to reach out for your suggestions and your help as we try to help the small business infrastructure in America. With that, if there are no further comments, the Committee will stand adjourned. Thanks. [Whereupon, at 3:52 p.m., the Committee was adjourned.] APPENDIX MATERIAL SUBMITTED [GRAPHICS NOT AVAILABLE IN TIFF FORMAT] [all]