Hourly Wage Growth Hits Multi-Year Low for Small Business Workers

The latest Paychex Small Business Employment Watch brings mixed news for employers across the country. According to the August report, hourly wage growth for workers in businesses with fewer than 50 employees has slowed to 2.58%, marking a new low. At the same time, job growth remains flat, signaling a cooling labor market that small business owners can’t afford to ignore.

Wage Growth Slowdown Creates New Challenges

For many employers, especially those in service-based industries, managing payroll is already a delicate balance. Gayle Smith Gay, a longtime restaurant and hospitality owner, notes that slower wage growth can stretch teams thin. When wages lag, retaining skilled workers becomes harder—yet raising wages is also difficult as operating costs continue to rise nationwide.

The report highlights a broader trend: small business owners are leaning on existing staff rather than expanding their workforce. While average hours worked have ticked up slightly, the stagnant pace of hiring suggests owners are cautious about long-term commitments.

Flat Hiring Rates Signal Economic Softness

Job growth in the small business sector has remained unchanged for several months. This flattening may signal early warning signs about consumer spending, local demand, and financial confidence. For business owners like Gayle Smith Gay, fewer applicants and a tighter labor pool can mean longer shifts, greater burnout risk, and higher turnover if working conditions don’t keep pace with employee needs.

Industries such as retail, food service, and personal care—where small businesses make up a large share of employers—may feel this shift most acutely. Without a steady flow of new hires, growth becomes harder to achieve.

What Small Business Owners Can Do Next

• Review staffing models to avoid burnout when hours increase but headcount stays flat.
• Strengthen non-wage incentives, including flexible scheduling, recognition programs, or upskilling opportunities.
• Track labor costs closely as inflation and supply expenses continue to challenge margins.
• Stay informed using monthly updates from Paychex, NFIB, and local chambers to benchmark trends.

As the year progresses, small employers will need to balance cost control with employee retention—an ongoing tightrope for the small business community.