Labor shortages, inflation top challenges for Alaska small businesses, new study finds • Alaska Beacon
4 mins read

Labor shortages, inflation top challenges for Alaska small businesses, new study finds • Alaska Beacon

The most common challenges facing Alaska small businesses are inflation, operating costs and labor shortages, according to a new study.

The Alaska Small Business Development Center study tracks the growth of small businesses in the state and projects future trends. This is the seventh annual report.

Inflation was most often cited as the top problem facing small businesses in Alaska. However, survey respondents identified inflation as a broader problem for businesses, not as a direct problem for their specific business. Only 12 percent cited inflation as the biggest challenge facing their business, third only to finding customers or clients and employees.

Jon Bittner, the center’s executive director, highlighted the impact of inflation on rural small businesses during his presentation to the Anchorage Chamber of Commerce on Monday. For small businesses outside Anchorage, inflation is exacerbating a long-standing problem of high prices, according to Bittner.

“People are only willing to pay what they want for things that are not essential,” Bittner said during his presentation. “If you’re not selling bread, water, diapers — things like that — it starts to become more of a discretionary expense, and you’ll see that in the data, where people are buying less.”

Labor shortages are a problem for businesses across the state, although it’s not a new problem, according to Bittner. “It’s simply a function of the size of our population, our large geographic area and the difficulty of growing our population through imports or employability,” he said.

The survey found that 58% of businesses said they had difficulty hiring new staff, with the biggest barrier to hiring being the lack of qualified candidates.

For Jen Motyka, chief innovation officer at Alaska Premier Auctions & Appraisals, the survey results about hiring were “right on target.” “Every business owner really needs to look at their processes and see where they can improve them,” she said after the presentation.

Bittner said industries, especially construction, shipping and transportation, are also facing stiff competition for jobs from the lower 48 states. “We’re seeing marketing from other states saying, ‘Hey, you have a lot of options, come here, we have a 12-month construction cycle, we don’t have to shut down for the winter,’” Bittner said. “If everybody’s hiring at the same time, the economy’s trying to recover at the same time, everybody’s using the same capital programs at the federal level, it’s going to be harder than ever to get people here. It’s expensive to live here. It’s expensive to move here.”

Alaska is seeing more people leave the state than come to it for the 11th consecutive year. For Bittner, the answer to workforce development is a “local” approach that focuses on people who already live in the state. Tools like the University of Alaska and apprenticeship programs can help develop a more specialized workforce, Bittner said in his presentation.

Last month, Gov. Mike Dunleavy signed legislation aimed at encouraging Alaska students to stay in the state for college and job training through merit scholarships. Alaskans who attend college in the state are more likely to stay after graduation.

Bittner said relying on outsiders is not the answer to Alaska’s labor shortage. “We’ll get some, we always have. But to solve the gap that we’re talking about, I don’t think importing is the answer,” he said.

Despite the challenges, the study found some positive results: 36 percent of Alaska businesses are owned by women, higher than the national average. Alaska also has the second-highest percentage of American Indian and Alaska Native-owned businesses in the country.

More than half of the companies surveyed predicted a healthy financial situation for the next 12 months. “You don’t start a business in Alaska if you’re a pessimist. These are people who have been operating for generations in one of the most challenging economic environments in the country,” Bittner said. Their ability to adapt to those challenges, Bittner said, is “more of a transition than an insurmountable problem.”