Small Business Owners: Employee Costs Consistently Increasing, Skilled Labor Pool Keeps Shrinking 

Survey showed biggest hurdles are inflation, quality of available labor, and the economy  

Lansing, MI – Michigan small business owners are raising red flags on impediments to growth: they’re battling rising costs, while at the same time navigating a shrinking pool of qualified labor, according to the Small Business Association of Michigan’s (SBAM) winter survey.  

“Small businesses of all sizes across Michigan are navigating the complex challenges of higher costs across the board, while competing to hire and retain employees from a constrained pool of dependable talent,” said Brian Calley, President and CEO of SBAM. “These hurdles have a significant impact on Michigan’s long-term ability to grow: particularly where it restrains small and mid-sized business expansion.” 

Finding and keeping talent stood out as a primary barrier to small business growth, with 66 percent of small business owners reporting difficulties remaining fully staffed. To counter this, 68 percent of small businesses raised wages, expanded benefits or increased time off. Of these changes, wage increases were the most common tactic used to attract and keep talent. 

At the same time, 87 percent of small businesses are seeing higher cost increases over previous years, including a sharp rise in the cost of providing benefits. Eighty-four percent of small business owners experienced health insurance premium increases of up to $2,000 per employee in the last year.    

The survey also showed that:  

• 60 percent of small businesses are making a conscious operational effort to prepare for a potential recession.
• 93 percent of small business owners are maintaining or increasing an investment in training and upskilling.
• 62 percent of businesses noted the adoption or exploration of Artificial Intelligence (AI) in some aspect of their business. 
• 59 percent of small businesses reported Earned Sick Time Act requirements have had a negative impact on their business. 
• Despite challenges, 63 percent of small businesses said they are feeling optimistic about the long-term survival of their business.  

The survey was conducted in February 2026, with 83 percent of respondents having 50 employees or fewer.