Workforce shortages and inflation are key challenges for Alaska's small businesses, new survey says

Inflation, operating costs and workforce shortages are the most common challenges facing small businesses in Alaska, according to a new survey.

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

Inflation was most frequently cited as the top issue facing Alaska’s small businesses. However, survey respondents identified inflation as an issue for businesses more broadly, rather than an immediate one for their specific business. Only 12% named inflation as their business’s biggest challenge, the third-highest after finding clients or customers and their workforce.

Jon Bittner, the executive director of the center, underscored inflation’s impact on rural small businesses during his presentation for the Anchorage Chamber of Commerce on Monday. For small businesses outside of Anchorage, inflation exacerbates the longstanding issue of high prices, according to Bittner.

“There’s only so much that people are willing to pay for things that aren’t essential,” said Bittner during his presentation. “If you’re not selling bread, water, diapers — things like that — it starts to become more of a discretionary spend and you’re going to see that in the data where people are buying less.”

Workforce shortages are an issue for businesses across the state, though it isn’t a new problem, according to Bittner. “It’s just a function of our population size, our large geographic area, and our difficulty in growing our population through either imports or hirability,” he said.

According to the survey, 58% of businesses reported challenges in hiring new employees, and the largest hiring barrier was a lack of qualified applicants.

For Jen Motyka, the chief innovation officer at Alaska Premier Auctions & Appraisals, the survey’s findings about employee hiring was “spot-on.” “Every business owner really needs to take a look at their processes and see where they can streamline,” she said after the presentation.

Industries, especially construction, shipping, and transportation, are also facing steep hiring competition from the Lower 48, according to Bittner. “We’re seeing marketing out there from other states saying ‘Hey, you have a lot of options, come here, we have a 12-month annual construction cycle, we don’t have to stop work for winter,’’” Bittner said. “If everybody is hiring at the same time, the economy is all trying to recover at the same time, everybody is sort of accessing the same capital programs on the federal level, it’s going to be more difficult than ever for us to attract people all the way up here. It’s expensive to live up here. It’s expensive to move up here.”

In Alaska, more people continue to leave the state than arrive, which has occurred for 11 consecutive years. For Bittner, the answer to workforce development is a “homegrown” approach that focuses on people who already live in the state. Tools such as 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 a bill into law intended to incentivize Alaskan students to stay in state for college and vocational training via performance scholarships. Alaskans who attend college in-state are more likely to stay here after graduation.

Relying on outsiders coming to the state isn’t a fix-it for Alaska’s hiring squeeze, according to Bittner. “We’re going to get some, we always have. But in order to solve the kind of gap we’re talking about, I just don’t think imports are going to be the answer,” he said.

Despite the challenges, the survey yielded some positive results: 36% of Alaska’s businesses are women-owned, which surpasses the national average. Alaska also has the second-largest share of American Indian and Alaska Native-owned businesses in the nation.

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

The Alaska Beacon is an independent, donor-funded news organization. Alaskabeacon.com.