The labor force participation rate has decreased a few points. People may exit the labor force for multiple reasons:
I don’t know that (1) would be much different now. Any increase in (2) is probably related to (4), which we’ve discussed. But I bet schools being closed is a driver of (5).
In Louisiana maximum UI benefits is $245 (2nd lowest in the nation) now add $300.00 from the Feds and you get $545 now divide by 40 hours (no way they’re getting that many hours) and you get $13.62 per hour. Believe me, they’re not making that much at work. It would be foolish to take a pay cut and go back to work. Also, money saved: daycare, gas etc.
I don’t see it as being cavalier, I see it as being realistic. We are in a national crisis and people are going to suffer because of it and people are going to look after their own interest first. Some businesses will be forced to close, but don’t blame the work force for not being willing to sacrifice their own best interest for those of the business owner. It’s sad, but these things happen in times of crisis. Nobody’s fault, and definitely not the workers fault.
And there’s definitely plenty of small businesses who are run by assholes and won’t be missed.
I was in a meeting a couple of years ago with the heads of a bunch of national shipping and logistics firms. They were all talking about the shortage of truck drivers. There’s a gap of tens or thousands of truck drivers that would only grow as the need increased, drivers retired, and few new entrants were training to get CDLs. The person they were all whining to was a very senior federal official. He asked a simple question which basically shut down the conversation: “Have you tried paying them more?”
What are these restaurants’ answer?
I thought self-employed people were currently eligible for unemployment. Am I mistaken?
With the layoffs during the pandemic, I’d bet that a lot of them have since found other jobs, and/or the stimulus checks/pandemic unemployment compensation change the situation, and for a lot of them, they’re not interested in going back to restaurant work right now, because they make similar money for less trouble. That’s most likely what the “Free money” people are bitching about- it changes the pay/trouble equation such that working in a restaurant is less attractive than the other alternatives. I mean, for some people it may be enough to allow them not to work, not work so much, or not work in a restaurant. After all, few customer-facing restaurant people are there by design, except maybe in high-end places. Most of them are there because it’s a somewhat ok paying job that’s readily available without needing a lot of experience or education.
It really is a case study in low wage alternatives; we see labor shortages in restaurants because the combination of pay and working conditions isn’t better than what people are getting from the government.
The problem I see is that this situation is temporary because of the Federal assistance. Once the pandemic is over in a year or so, the labor market is going to change, because that Federal aid is going to dry up, and people aren’t going to have that money coming in, so low wage restaurant jobs will probably be attractive again to more people than they are at the moment.
States were allowed but not required to extend unemployment benefits to the self-employed, gig workers, and others traditionally not eligible, under the CARES Act and its successors. I think every state has implemented some form of coverage for the self-employed, but the exact standards and eligibility requirements vary from one state to another.
At the start of the current pandemic I laid off employees, keeping only one person working. Things are just starting to pick back up, so I offered one of my former part time workers her job back. She’s bored and was eager to return, but she wanted me to pay her “under the table”. I’m not entirely sure how that’s even done, plus I am certain I’d be breaking some laws, so I told her no.
So today I got paperwork from the state regarding unemployment benefits. The form asks if I’ve offered a return to work for the woman who turned down my offer. I answered truthfully. I do not see this ending happily.
Eh, I don’t know
That sounds pretty cavalier. The definition of cavalier, outside of dogs and supporters of King Charles, is one who lacks concern. Not caring that people are losing their businesses and their livelihoods fits pretty squarely into that category.
I did not do so. But, I do actually care about people who lost everything, through no fault of their own.
Also not the business owner’s fault. The difference is, the worker can get a new job after the pandemic is over, and unemployment is no longer as generous. The business owner will, at best, have lost everything that they have worked for, and most likely will also be on the hook for loans and obligations that they can no longer cover.
Nah, the assholes are the ones who will mostly make it through intact.
My answer has been to substantially increase pay. I don’t know that all restaurants are in a position to do so. I have no lack of work available to my employees, and cater mostly to the 1% who were unaffected or even benefited during the pandemic, so I can raise my prices almost arbitrarily to afford to pay my employees a competitive wage.
Not all that many restaurants are going to be able to raise their prices, especially in the middle of a pandemic where most of their clientele have a reduced income. Restaurants are still being forced to operate at levels that are nearly impossible to break even on as it is.
Self employed people are not the same category as business owners. It depends on how your company is structured as to whether or not you can draw unemployment. Most are not structured with the owner as a wage earner, so they are not eligible.
I know absolutely nothing about unemployment, so thanks for clarifying. I will say that if most businesses structured themselves so that the business owners don’t draw a salary, they likely did so to avoid paying payroll and income taxes on the equivalent of their wages. Those taxes fund government services like expanded unemployment benefits. They reap what they sow.
Eh, not really. I structured my business the way I did on the advice of my CPA. The only payroll tax that I avoid is social security and unemployment. The fact that I’m not paying into social security means that I will not be able to draw on it, and in normal circumstances, I would not have been eligible for the unemployment that I had paid into.
As far as federal and state taxes, I pay the same share I would if I were an employee, and the extended unemployment payments come from that, not state unemployment.
I personally know many people who are avoiding work as long as possible since the unemployment (or extended disability) benefits make working not worthwhile. And a lot of others secondhand (e.g. a coworker of my daughter who told their boss she wasn’t coming back as long as she had her covid UE benefits. The boss said he couldn’t guarentee she would get her job back when she wanted to return, and she said she would take that risk. Et al).
On a broader level, it’s a problem which feeds itself. The more generous you make unemployment, the more you incentivize unemployment, which drives the unemployment rate to elevated levels. This elevated unemployment rate is in turn used to justify extending the generous unemployment benefits, and so on goes the cycle.
As long as COVID is out there, and people not working helps to reduce transmission, then incentivizing people not to work is a feature, not a bug.
However, once we get over this, then I would agree that keeping benefits extra generous will be detrimental to the economy.
But let’s see what you know about business structure:
Sole proprietors aren’t even allowed to pay themselves salaries. C-corps and S-corps must pay their owners if the owners work for the company. Cash flow, liability, shared ownership, timing, etc., all come into play here. So maybe you could expound a bit on this reaping and sowing.
So your CPA’s advice was intended to save you payroll taxes and unemployment insurance, the consequences of which are that you aren’t eligible for unemployment. You are kind of conceding my point. I understand the fine point that you are making - the unemployment insurance you would have paid didn’t actually fund the more recent enhanced unemployment benefits, which were funded from general federal revenues. But your structure also seems intended to minimize your payments to general federal revenues too.
I don’t know how your business is structured so I can’t dispute what you are saying but this is a little surprising. Ordinarily, business owners structure their income so that much of their income comes from dividends that are taxed at a favorable rate compared to wages. Whether this is a fluke or a desirable feature of our tax system is a matter for Great Debates but I would expect that you and your CPA would take advantage of this. Or are you but you aren’t counting that as part of the difference between what you do pay and what you would pay?
Sole proprietorship doesn’t count as a “company structure” since, you know, it doesn’t involve a company. A comment about sole proprietorship as it relates to a company structure is irrelevant to k9bfriender’s comment about owners structuring a company with the owner as not a wage earner.
And I’m not sure what your point is in any event.
This is true, but the game here is ordinarily to pay wages as low as owners can get away with and to pay as much as is possible and desired as dividends. This allows the owners to benefit from preferable tax rates on dividends relative to wages. Ordinarily, that means saving taxes with no other bad collateral consequences. I understand the motivation to do this. Who doesn’t want to save on taxes?
Where my understanding breaks down is how the business structure that business owners choose determines whether they are eligible for unemployment insurance that is currently being offered to the self-employed. If there is a link between earned wages of business owners and their eligibility for unemployment, please enlighten me. It seems that business owners’ perfectly-legal and rational tax-avoiding structures had the unanticipated collateral effect of disqualifying them from unemployment insurance and we’re supposed to feel sorry for them. I guess I just don’t.
Last night, there was a big back and forth on Facebook because our local Red Robin, which I have never patronized, was closed for the evening, and the sign said “Insufficient staffing.” Some people wondered why this would be, and the most logical reason is because someone who works there has COVID and the employees are being quarantined.
This is on the heels of our local IHOP being shut down by the health department, and by all accounts, justifiably so.
Wake me up when it becomes a cycle.
The last time I was in our local Office Depot, there was literally just one worker covering the entire store. In the middle of the afternoon.
So, it’s like any other Office Depot I’ve been in for the last five years.
Well, it is obvious that you really don’t understand at all. Nothing in your post was even close enough to how things work that I have any desire to even start digging into everything that you got wrong in your uninformed assertions and assumptions.
Anyway, if you don’t want small businesses, that’s fine. They will be replaced with large multinational corporations that can better weather such events.