The Second Wave could be a Poverty Wave
Pandemic Diary Day 20
April 13, 2020
I heard that statement on television the other day and thought it was the best way to sum up what is happening in our economy and how it will get worse before it gets better if the U.S. government doesn’t step up their game.
I have never intended for this diary to contain political thoughts. That is for newspapers of our time, but I know that people will construe some of this as political, it isn’t, it is about compassion. Also I am not an economist, although I am pretty well versed in the study of economics. Most important I stand 100% behind Shelter in Place. The last fact I would like to make is there is no way to predict where and when the winds will blow.
In normal times in America 27% of adults would need to borrow or sell something to pay for an unexpected expense of $400, and one quarter of adults have no retirement savings, and skipped necessary medical care because they were unable to afford the cost.
This leaves us in a rather serious and precarious situation as we ask everyone to shelter in place, but it is especially difficult for those that work in the gig economy or those that make no more than minimum wage. Shelter in Place has become a financial death sentence to restaurant workers, stylists, musicians, retail workers, hotel workers, the beer seller at the ball park, and thousands of others.
According to the Labor Department, 6.61 million Americans filed initial claims for unemployment in the week that ended April 4. That brought the three week total–after the prior weeks total was revised up to 6.87 million–to 16.8 million.
The three-week total implies an unemployment rate approaching 15%. That’s up from 3.5% in February. Both the likely unemployment rate and the speed of the downturn are stunning.
The horror stories that abound from state to state of the inability for the system to handle this overwhelming onslaught of unemployment claims is heartbreaking. If you need to sell something to pay for a $400 bill, you certainly can not wait around for weeks to receive your unemployment check.
This whole subject can get complicated when you have the idea of unemployment and then the stimulus checks. First, unemployment is only a fraction of a persons take home pay, it was always meant to be a stop gap between jobs, so the stimulus package is important even if you qualify for unemployment benefits.
There are also many categories of people that do not qualify for unemployment and will rely directly on the stimulus package. Many of these are the owners of small businesses that often don’t pay themselves an actual salary, contract employees (such as your personal trainer at the gym), housekeepers, gardeners and nannies that are paid in cash, and a slew of others.
The first round of the stimulus package is to give $1200 to families that make less than $75,000. “While $1200 per adult is very meaningful, no matter who you are, it’s not going to be this ongoing safety net that is going to keep families afloat”, …economist Ernie Tedeshi. This needs to be, and should have been, from the beginning, an agreement to issue a monthly check until this is over.
The feeling, I am sure, amongst many people on Capitol Hill is that it will encourage people not to work. That is exactly the point. In a mindset that spins America on its head, it is time to pay people to stay home and Shelter in Place for the greater good.
As economist Tedeshi points out $1200 is really not enough, especially when you consider that the median monthly rent in the nation is just over $1,600 and the median mortgage payment is $1,400.
To be fair, the Federal minimum wage is $7.50. One months wages at this rate pre-tax is $1160. So in this case $1200 looks about square.
But is it? There are only sixteen states in the US that pay the federal minimum wage. The rates are all over the map in the other 34 states ranging from $13.50/hour in Washington State to $8.70 an hour in Ohio. $1200 is pretty paltry to the people who live in those 34 states.
Maybe it is time to address the serious financial divide that is haunting this country.
Many people are saying that the pandemic is forcing us to do just that, but I don’t see it. Gig economy workers are putting themselves on the front lines by standing at cash registers, doing other peoples shopping, delivering food and driving ride-shares, all of which don’t allow for 6 foot distancing. They are not being paid more for this work. Couple this with no provisions for sick leave and we have created a class of workers that put their lives in danger for what? Sick leave and sick pay or lack thereof are a big factor in this as well. The first go-round from Congress omitted forcing companies with over 500 employees to provide sick leave. This is over 59 million people that are left out in the cold.
Keep in mind, these companies are some of the richest in the world, often do not pay taxes in the United States, and are often the first beneficiaries of government bail-outs. Where is the compassion?
There is no federal sick leave policy in the U.S., and only 12 of the 50 states and Washington, D.C., require employers to offer paid sick leave . Although major companies like Facebook, Amazon and Microsoft have implemented work-from-home policies. The Bureau of Labor Statistics data shows that only 29% of U.S. workers have that option.
The package also gave a pass to companies with 50 or fewer employees. This means that in all, about 80% of the American workforce is not covered by the bill passed by congress.
One of the ideas behind some of this stimulus package was to get money to small business owners so they could continue to pay their employees and alleviate the need for them to collect unemployment, while this sounds great it isn’t working.
The Small Business Administration has a strange formula for determining the word ‘small’ in small business. However, according to the SBA, firms with less than 100 employees has the largest share of small business employment. I can assure you, as someone who ran a small business for thirty years, these employers want to pay their employees. They are not only family, but training new employees when this is all over is far more expensive than paying existing employees now. The government has set aside monies for no-interest loans for these companies, but they did not create a way to get this money to those who need it. So in this critical time to keep from the world collapsing around them, small business watch as their government creates quick overnight ways to get bail out money to large corporations as they wait for a pipeline to be created for them. Have you ever thought of how difficult it is to get the government to create a new program? These companies will be dreams upon the ash heap if the waiting is much longer.
A side note, during the 2008 crash the government worked with the banking system to make sure monies were given instantly to the major banks and large companies that were deemed to need the funds. These pipelines are still in place. The system is essentially collateralized loans through the Treasury Department, an entirely different conversation.
And finally, there are the farmers. Farmers across our vast country have been suffering already due to our tariff war with China, but small and midsize farmers have always lived right on the edge. They are facing another loss of revenue due to the closure of restaurants and schools that no longer need their products. On top of this, the administration is attempting to lower field workers wages to help these farmers. Farmers receive only about 15 cents from every dollar spent on food, and yet punishing workers is not the answer either.
We have created a divide in this country between the haves and have nots that will lead to a hellish situation of crops not picked, stores not stocked, food not delivered if we don’t start to learn to be a more compassionate country and realize that safety nets are not handouts.
Grover Norquist said “I don’t want to abolish government. I simply want to reduce it to the size where I can drag it into the bathroom and drown it in the bathtub.” This quote does not represent the country we need right now.
That is however, where we are, we have gotten rid of all of our safety nets. Between 2011 and 2018, nondefense discretionary spending fell by 12 percent. Now we need to figure out how to keep our humanity, help others and find our compassion and do it all with a deficit in both the financial and moral compass of our country right now.
In a normal year unemployment causes 45,000 suicides a year worldwide, it is frightening to consider where we are headed.
My Horoscope for today: It can be a little difficult to concentrate today. Follow a schedule combined with positive affirmations.
The NYT Crossword Puzzle: Extremely easy, but why can’t the world agree on how to spell Tsar, Czar?
San Francisco weather: 60 degrees and sunny
NYSE DOW opened at: 23698
Italian word of the day: sollevato (relieved)
Spanish word of the day: malgastar (to waste)
OED word of the day: sumpter
Days under Shelter In Place: 31
Reading: Unto Us A Son is Given by Donna Leon
Reading Canto XVIII, XIX of Inferno by Dante
My Black and White Picture of the Day
Something Silly From the Internet: · I used to spin that toilet paper like I was on Wheel of Fortune. Now I turn it like I’m cracking a safe.
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