Rising costs due to inflation may impede the ability of compact business owners to give raises.
Amid inflation, tariff uncertainty and AI’s promise to transform the workplace, compact business owners still want to hand out raises.
When questioned if higher compensation or meaningful work is the most critical factor to ensuring employee happiness and engagement in the future, 62% of compact business owners declared better pay, according to the Forbes Research 2025 Small Business Survey.
However, it is unclear how many compact businesses can raise wages in light of inflation, economic uncertainty and notoriously thin margins, a perennial factor identified by the Indiana state director of the National Federation of Indepfinishent Business, Natalie Robinson.
Elsewhere in the Forbes survey, which polled 535 compact business owners in March and April, respondents cited keeping wages aligned with inflation as their top workforce challenge.
Owners Challenged By Employee Turnover
Small businesses are struggling to attract and retain talent now, with a seasonally adjusted 33% of compact business owners reporting job openings they could not fill, according to a July trfinishs survey conducted by the National Federation of Indepfinishent Business.
“The challenge of finding qualified workers is easing overall but still remained significant for many compact business owners,” NFIB chief economist Bill Dunkelberg declared in the federation’s July jobs report. “Easing labor market pressures are also reflected in fewer firms raising compensation.”
Minor easing of economic pressures may be the best compact businesses can hope for in the near term.
“This could be the calm before the storm,” Bankrate chief financial analyst Greg McBride declared in response to the Consumer Price Index report for July. “A slew of tariffs are taking effect this month [August]. It may take a few months before those costs build their way fully to the consumer, but inflation is poised to pick up further in the remainder of 2025.”
For compact business owners, inflation could keep wages down — even if they aspire to keep employees happy and engaged with higher compensation.
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