A whole 90 days of anxiety have passed since California Gov. Gavin Newsom issued the nation’s first statewide stay-at-home order. Believing that lives saved would outweigh lives disrupted, 42 states made the same gamble. After all, lives are worth more than livelihoods, and it was important to flatten the COVID-19 curve. People understood that the moment required tough trade-offs and accepted them, some more readily than others.
Tens of millions of jobless claims later, what has surprised so many people is how politicians seem determined to make the gamble’s costs higher than necessary, as if economic cruelty would make lives easier to save. Ordering utilities to be turned off for “non-essential” businesses and arresting stylists for cutting hair so they can feed their children are examples of actions taken in the name of saving lives. Those actions neglect that on the other end of every paycheck are lives and livelihoods.
This is not to say there hasn’t been a lot of money thrown at the problem, but the bailouts were designed so poorly that even as states begin to reopen, many businesses can’t. After ordering businesses to shut down, lawmakers made collecting unemployment benefits a better deal than going back to work. In the meantime, “small businesses” such as the Ruth’s Chris Steak House chain and the Los Angeles Lakers got millions of dollars, while real small businesses (the kind without a single lobbyist or congressman on their speed-dials) were left reading through hundreds of pages of legislation while fighting the switchboard at the Small Business Administration.
A recent study projects that of the millions of small businesses forced to shut down since March, 2% will close for good. That’s more than 100,000 small businesses closing permanently, destroyed by lockdowns. In Washington, D.C., where the difference between million, billion, and trillion is shrugged off, that might sound like a small price to pay for this incompetence. In the real world, it isn’t. If lawmakers focus on a few basic principles, there’s still time to help the small businesses struggling to survive, and there are several steps they can take.
First, Congress needs to fix the mess in unemployment benefits. The unprecedented $600-per-week benefit boost seemed generous, but at this point, it is backfiring for businesses and workers alike. Small businesses that did everything right by saving for emergencies and following health protocols are ready to reopen but remain closed, perhaps in part because the average unemployed person now makes $50,000 annually. That’s more than the average employed worker.
We all wanted faster wage growth, but this is not what we had in mind. Workers will ultimately pay the price in fewer opportunities if the unemployment program continues to hold back our recovery artificially.
Secondly, workers and businesses need more flexibility than ever. With kids at home and restrictive capacity guidelines at work, many workers and businesses cannot reopen in a traditional 9-to-5 form. Instead of closing, lawmakers should help businesses and workers bridge the gaps by allowing more workers to become independent contractors. By using independent contractors, businesses can hire more workers, and those workers have more flexibility to maintain the hours, salary, and schedules they want. It’s a win-win in a time of mounting losses.
Small businesses deserve a win. In the best of times, small businesses sponsor flag football teams, surprise the local firehouse with breakfast, and create jobs around the corner, not around the world. They’ve also been a saving grace during the pandemic.
Kaas Tailored, a small company based in Mukilteo, Washington, that usually makes loveseats, started making masks. Enexor BioEnergy in Franklin, Tennessee, converts organic waste into energy on a usual workday. It designed and began to produce ventilators in just three weeks. And 12 local distilleries in the Philadelphia area alone started making hand sanitizer.
This can-do spirit explains why the Small Business Association says that small businesses generate a majority of new jobs. America is ready to harness that spirit. The recovery can only begin when small businesses recover. Work, not welfare, is the key to starting the engine.
Scott Centorino is a senior fellow at the Foundation for Government Accountability.
