The COVID Pandemic
I know many readers are here for the threat modeling, and I could claim that this is the “what are we going to do about it” post, which it is, but I don't want to have to blog all threat modeling all the time. So this is the “Seattle is a month into COVID-19” post.
There are a huge number of tips on how to stay safe, how to work from home, etc. I'm a fan of discipline in lists, and so I'll share only one: "I Spent a Year in Space, and I Have Tips on Isolation to Share." (Also, his book, "Endurance", was excellent, as mentioned in my Books Worth Your Time (Q4).)
No, what I want to talk about is what we're going to do about the possibility that this could be a year or more of isolation and other measures to flatten the curve, and what that means. According to Chase, a typical small business does not have cash on hand to cover a month of expenses, never mind a year. We're going to see a lot of those businesses disappear.
There are millions of people who do gig work. Those people typically lack health insurance. My consulting firm has a few people who typically do either a job here and there, or small monthly bits, like our bookkeeper. I've talked to all our contractors, and almost all of them have seen their pipelines and even promised work on signed contracts evaporate. I do a lot of training work, and that's all postponed indefinitely. That's mirrored in restaurant workers, artists, and all sorts of people who keep businesses humming along. (We're fortunate to have more than a month of cash on hand, and expect to be able to meet our obligations for what I'd normally call 'the foreseeable future.' We're spending some of it on our contractors, improving products for when this turns around.)
But I'd like to think about those who are less fortunate, especially gig workers, who are generally not covered by unemployment insurance when their gigs disappear.
But the way that the bailout is operating, which seems to be a small amount of cash to most Americans and then lots of loans, doesn't actually help the gig workers, and it won't help many small businesses. For example, read What Does It Really Cost to Run a Restaurant?. Assume that they don't do a takeout option, but try to get by. Some of their cost are highly variable: buying food (16%) and labor (44%) might go away. But equipment leases, operating permits are still $10,000 a year. Rent is $86,000. For rough numbers, let's call that fixed costs of $10,000 a month. And their net income is $21,000. If they take out a loan, then in two months, they've spent their net income for the year on those fixed expenses. If they need to stay closed for 3 months, then when they re-open, assuming all of their business reappears instantly, then they've paid those operating expenses, and spent their net income for this year and half of next. So, setting aside the dream, setting aside the obligations they may feel to staff, does it make economic sense for them to take out a loan? I think probably not. And this is the case for most small businesses — even with loans, there's a limit to how long they can pay salaries. Of course, there's always the old 'take out a government-backed loan you can't pay back and pay salaries with it' trick for transferring money from the taxpayer to employees. But we have a more efficient scheme for that: unemployment insurance.
Going back to the macro level, that means a lot of people unemployed, potentially for far longer. Many of their expenses, like rent, are fixed, and it's hard to move in a pandemic. (Assuming that we don't want people to go and see a new apartment before moving in, that we don't want them to hire movers to help, and that having them abandon many of their possessions in moving is bad.). Also, here in Seattle, we have a severe housing shortage, so finding inexpensive places to live is hard.
Back to unemployment. Washington, for example, if you earned $42,000 or more per year, your unemployment would be the maximum amount, which is $790/week or $3,160/month, and benefits are stopped at 6 months.). The state median income is $4,237. Waving hands a little over the math, that means even a median income family will be stretched.
So I think we need a massive increase in unemployment payouts, including new ways of treating those who were earning above $42,000 a year. We need to extend unemployment to gig workers. We need this more than loans to small businesses. (To be clear, I'm not opposed to business loans, but rather that even with them, we're going to see lots of people out of work. Hiring will be slow because of uncertainty and reliance on in-person interviews.)
If we're going to bail out airlines who've shoved massive profits into stock buybacks and cruise lines that kept operating as their passengers got sick, we should be bailing out gig workers. We should be helping families and individuals in unusual ways during these very unusual times.