Call-ups of military reserves are causing serious problems for some small businesses and some larger businesses that depend on employees with specialized skills.[@@]

Congressional Budget Office Director Douglas Holtz-Eakin told a U.S. Senate panel today that out of the 860,000 reservists in the Selected Reserve, between 8,000 and 30,000 hold key positions in small businesses.

“Considering that snapshot of reservists’ employment, CBO expects that as many as 30,000 small businesses and 55,000 self-employed individuals may be more severely affected than other reservists’ employers if their reservist employee or owner is activated,” Holtz-Eakin told the Committee on Small Business and Entrepreneurship, according to a written version of his remarks.

Only about 6% of businesses employ reservists, and fewer than 0.5% of self-employed people are in the reserves, according to CBO figures.

But call-ups hurt the businesses that do employ reservists, Holtz-Eakin said.

“Some businesses may absorb the loss of personnel at little cost, but others may experience slowdowns in production, lost sales, or additional expenses as they attempt to compensate for a reservists’ absence,” Holtz-Eakin said.

The CBO has considered the following options for mitigating the impact of reserve call-ups:

- Tax credits or direct payment compensations.

- Loan subsidies to employers.

- Creation of a new kind of call-up insurance for reservists’ employers.

- Exemptions of certain reservists from call-ups.

Holtz-Eakin noted that exemptions could hurt the military.

In November 2004, about 33% of military forces in Iraq and Afghanistan were members of the reserves, Holtz-Eakin said.