- The midterm elections took place on Tuesday, Nov. 8. All 435 seats in the U.S. House of Representatives and 35 of the 100 seats in the U.S. uhhSenate were formally up for election.
- Election issues that small business owners serially highlighted as being of particular concern include inflation, the labor market, and the status of democracy in the U.S.
- Small business owners’ economic outlook leading up to the election was “cautiously optimistic,” with concerns over future recession balanced with the belief that their business would not just survive but expand.
- This article is for small business owners who are interested in how the aftermath of the 2022 midterm elections could impact their business.
Update 11/15/2022: The voting in the 2022 midterm elections is over, with the exception of the upcoming runoff U.S. Senate election in Georgia. The Democrats successfully held onto control of the U.S. Senate, while control of the House of Representatives remains undecided, though the Republican Party is nearing the 218 seats needed for a majority.
As a small business owner, you may wonder what the results of this year’s midterm elections mean for you and your business. What issues were small business owners invested in during this election cycle? What should you be informed about as the new Congressional class takes shape?
Midterm Elections 2022
While midterm elections may not be as flashy as presidential elections, they have a great deal of influence on the direction of federal policy, with the composition of Congress up for grabs.
In addition, there was no shortage of non-federal candidates running on the ballot across the nation. Midterm elections also determine which party controls state legislatures and governor’s mansions across the country. That means control of local, county and state governments were similarly up for grabs, with potentially significant implications for healthcare policy, business regulations and taxes where you live.
The midterm elections took place on Tuesday, Nov. 8, 2022. All 435 seats in the U.S. House of Representatives, and 35 of the 100 seats in the U.S. Senate, were up for election. Headed into the election, the Democratic Party (aligned with incumbent President Joe Biden) controlled both the U.S. House of Representatives and the U.S. Senate by a razor-thin margin.
Did you know?: Technically speaking, the Democratic caucus currently only holds half of the chamber’s 100 seats. However, in an evenly split Senate, the incumbent Vice President is responsible for breaking ties per the U.S. Constitution.
Issues facing small businesses in 2022 and beyond
These are some of the key issues small business owners were focused on heading into the midterm elections. No matter what the composition of the government is once all the votes are counted, these issues will be an important part of policymakers’ agendas in the coming years.
Inflation
Small business owners consistently cited high topline (or overall) inflation as an important issue in this year’s midterms. (What is inflation? Broadly speaking, it’s defined as a trend of rising prices for goods and services in an economy.)
In September, the National Federation of Independent Business (NFIB), a lobbying group, found that 30% of SMB owners surveyed listed inflation as the most critical issue currently facing their business.
Why the focus on inflation? While substantial evidence suggests that large companies can have their profits buoyed by inflation, the opposite often is true for small businesses.
In a September survey of small business owners by Goldman Sachs, an overwhelming 83% stated they were “concerned their customers may turn to bigger companies given their ability to better withstand inflationary pressures and potentially offer more competitive pricing.” There’s evidence for this belief: A recent report from small business lender Kabbage found that, while revenue for small businesses nearly doubled over the last year, small business profits simultaneously shrunk by 4%, as inflation ballooned operating costs and cut into profit margins.
In some ways, inflation was more of an umbrella category than a single issue in this election, as it relates to multiple other concerns for small business owners. For instance, supply chain difficulties can be an issue since they can cause increased inflation, whereas economists often see a tightening labor market as an effect of increased inflation.
Tip: The way broad concerns about inflation translate into a specific and coherent policy agenda to combat rising prices can be murky. When Congress passed President Biden’s Inflation Reduction Act earlier this year, a Small Business for America’s Future snap survey of small business owners nationwide found that a substantial majority supported the legislation.
Supply chain challenges
A supply chain is the (often huge) chain of producers, suppliers, distributors, shippers and sellers that make a final product’s appearance on the market possible. Much like a physical chain, the entire system is at risk if there is a single weak link.
For example, if you run a small handicraft business, and your supplier of red fabrics is late with orders due to historic slowdowns in shipping, that can throw your production of holiday scarves into disarray, making your own orders late with adverse consequences in return. These issues have led to renewed interest in supply chain management and what that means for small businesses.
When people talk about “the supply chain,” what they mean is “every supply chain combined.” This is because, particularly in an increasingly monopolized economy, a single supplier (or shipper, or factory) might be the only game in town, with economy-wide implications if they go under or slow down. These chains, and the overall supply chain, can be staggeringly complicated even for a single item. In return, small business owners have had to confront how to establish supplier diversity for their own businesses.
The implications of supply chain challenges for small businesses can be devastating, and they are already widespread. In an NFIB survey of small business owners, only 10% reported “no impact from supply chain disruptions.”
Many economists see supply chain disruptions as strongly tied to current overall inflation, itself of serious concern to small business owners, and part of why it is so tricky to address. In short, the recent rise in inflation is considered a supply-side problem: Since the COVID-19 pandemic makes production and distribution more difficult for both intermediate goods and final products, prices tend to rise accordingly.
Labor market
Economists still debate the extent to which wage increases for workers play a significant role in pushing overall inflation upward. However, once inflation is high (as it is now), that increase in prices also tends to drive up workers’ wages and the price of labor. Therefore, labor costs for small business owners tend to increase along with the prices of everything else.
When wages are high and workers’ bargaining power is increased, that translates into a tight labor market. In other words, employers in the market for labor are in a relatively tight spot, having to pay more for less.
Small business owners report difficulty making (and affording) new hires in the current market. In fact, the Goldman Sachs survey found that “difficulty finding and retaining qualified employees” was considered an even more significant issue than inflation, with “[73%] of small businesses experiencing hiring challenges [citing] competition with larger employers on pay and benefits as their biggest impediment.”
Small business owners have broader concerns, too
While the reasons small business owners are concerned about inflation, the supply chain and the labor market are relatively straightforward, they aren’t the only issues concerning voters who also own small businesses. Small business owners have diverse concerns:
- A pre-election survey by the advocacy group Small Business Majority found that small business owners tended to strongly support criminal justice reform across party lines, with a majority identifying it as important for increasing the size and quality of the U.S. workforce.
- Similarly, a recent U.S. Chamber of Commerce survey of small business owners found that a vast majority think it is “important to make a public statement in support of equality and fairness for members of the LGBTQ+ community,” with “72% of small business owners [OK with] losing customers as a result of supporting the LGBTQ+ community.” LGBTQ+ rights are on the ballot in some of this year’s highest-profile election contests.
- A nationwide pre-election survey of small business owners by Small Business for America’s Future (SBAF) found that an overwhelming majority both named rising U.S. healthcare costs as a significant hardship for their business and called on Congress to take action, with “[77% of] respondents [concerned that Congressional] leaders will fail to act or not go far enough in addressing” healthcare reform in the United States. How to offer health insurance for employees remains a difficult question.
- The state of democracy in the United States has also been a recurrent issue in this year’s elections – a concern widely echoed by small business owners, according to recent polling by SBAF. According to the SBAF national survey, “78% of small business owners surveyed are very concerned with the current state of our democracy,” with 73% in strong support of the statement, “when a well-functioning democracy is under threat, there are negative implications for the nation’s economy that harm small [businesses].”
These broader concerns speak not just to the immediate economic interests of small business owners, but also to their perspectives as American citizens and residents. As a particularly large voting bloc, many entrepreneurs hoped to make their voices heard on Election Day.
Small business outlook entering 2023
The paradox of small business owners’ viewpoint entering the midterm elections was that they were seriously concerned about all of the above issues – but personally optimistic about their own businesses.
A recent national economic outlook survey of small business owners by Bank of America found that while small business owners were relatively bearish on the overall economy (with 67% of respondents naming a recession as a top concern for the year to come), they were also highly positive about the outlook for their business, with virtually the same number of respondents expecting an increase in revenue, and over half actively planning to expand their business.
One significant issue flagged in the Bank of America survey that has not come up as broadly this election season is access to capital, a particular challenge among minority small business owners:
“More than a quarter (29%) of women business owners surveyed said they do not think they will ever have equal access to capital, while 40% of Black business owners, 27% of Hispanic-Latino business owners and 22% of AAPI business owners said the same.
Minority business owners reported more challenges accessing capital for their businesses than the national average, with 46% of Black and Hispanic-Latino business owners and 55% of AAPI business owners reporting they’ve personally faced challenges. Black business owners were most likely to say they are concerned about credit availability – 57% of Black business owners surveyed expressed concern vs. 45% overall.”
Both of these trends (personal optimism about their business prospects in the next year and concerns about access to capital) are strongly echoed in Small Business Majority’s national polling of small business owners, also released in the last month.
A midterm election with many issues for small businesses
It’s quite likely, for a wide variety of reasons, that we might not know the final election results for weeks to come. In the U.S. Senate race in Georgia, which could well determine the overall partisan control of Congress, we now know a runoff election will take place on December 6.
We will continue to update this article as more election results are announced.