About Reopening Businesses

Currently there is political debate about when businesses should be reopened after the Covid19 quarantine.

Small Businesses

One argument for reopening things is for the benefit of small businesses. The first thing to note is that the protests in the US say “I need a haircut” not “I need to cut people’s hair”. Small businesses won’t benefit from reopening sooner.

For every business there is a certain minimum number of customers needed to be profitable. There are many comments from small business owners that want it to remain shutdown. When the government has declared a shutdown and paused rent payments and provided social security to employees who aren’t working the small business can avoid bankruptcy. If they suddenly have to pay salaries or make redundancy payouts and have to pay rent while they can’t make a profit due to customers staying home they will go bankrupt.

Many restaurants and cafes make little or no profit at most times of the week (I used to be 1/3 owner of an Internet cafe and know this well). For such a company to be viable you have to be open most of the time so customers can expect you to be open. Generally you don’t keep a cafe open at 3PM to make money at 3PM, you keep it open so people can rely on there being a cafe open there, someone who buys a can of soda at 3PM one day might come back for lunch at 1:30PM the next day because they know you are open. A large portion of the opening hours of a most retail companies can be considered as either advertising for trade at the profitable hours or as loss making times that you can’t close because you can’t send an employee home for an hour.

If you have seating for 28 people (as my cafe did) then for about half the opening hours you will probably have 2 or fewer customers in there at any time, for about a quarter the opening hours you probably won’t cover the salary of the one person on duty. The weekend is when you make the real money, especially Friday and Saturday nights when you sometimes get all the seats full and people coming in for takeaway coffee and snacks. On Friday and Saturday nights the 60 seat restaurant next door to my cafe used to tell customers that my cafe made better coffee. It wasn’t economical for them to have a table full for an hour while they sell a few cups of coffee, they wanted customers to leave after dessert and free the table for someone who wants a meal with wine (alcohol is the real profit for many restaurants).

The plans of reopening with social distancing means that a 28 seat cafe can only have 14 chairs or less (some plans have 25% capacity which would mean 7 people maximum). That means decreasing the revenue of the most profitable times by 50% to 75% while also not decreasing the operating costs much. A small cafe has 2-3 staff when it’s crowded so there’s no possibility of reducing staff by 75% when reducing the revenue by 75%.

My Internet cafe would have closed immediately if forced to operate in the proposed social distancing model. It would have been 1/4 of the trade and about 1/8 of the profit at the most profitable times, even if enough customers are prepared to visit – and social distancing would kill the atmosphere. Most small businesses are barely profitable anyway, most small businesses don’t last 4 years in normal economic circumstances.

This reopen movement is about cutting unemployment benefits not about helping small business owners. Destroying small businesses is also good for big corporations, kill the small cafes and restaurants and McDonald’s and Starbucks will win. I think this is part of the motivation behind the astroturf campaign for reopening businesses.

Forbes has an article about this [1].

Psychological Issues

Some people claim that we should reopen businesses to help people who have psychological problems from isolation, to help victims of domestic violence who are trapped at home, to stop older people being unemployed for the rest of their lives, etc.

Here is one article with advice for policy makers from domestic violence experts [2]. One thing it mentions is that the primary US federal government program to deal with family violence had a budget of $130M in 2013. The main thing that should be done about family violence is to make it a priority at all times (not just when it can be a reason for avoiding other issues) and allocate some serious budget to it. An agency that deals with problems that affect families and only has a budget of $1 per family per year isn’t going to be able to do much.

There are ongoing issues of people stuck at home for various reasons. We could work on better public transport to help people who can’t drive. We could work on better healthcare to help some of the people who can’t leave home due to health problems. We could have more budget for carers to help people who can’t leave home without assistance. Wanting to reopen restaurants because some people feel isolated is ignoring the fact that social isolation is a long term ongoing issue for many people, and that many of the people who are affected can’t even afford to eat at a restaurant!

Employment discrimination against people in the 50+ age range is an ongoing thing, many people in that age range know that if they lose their job and can’t immediately find another they will be unemployed for the rest of their lives. Reopening small businesses won’t help that, businesses running at low capacity will have to lay people off and it will probably be the older people. Also the unemployment system doesn’t deal well with part time work. The Australian system (which I think is similar to most systems in this regard) reduces the unemployment benefits by $0.50 for every dollar that is earned in part time work, that effectively puts people who are doing part time work because they can’t get a full-time job in the highest tax bracket! If someone is going to pay for transport to get to work, work a few hours, then get half the money they earned deducted from unemployment benefits it hardly makes it worthwhile to work. While the exact health impacts of Covid19 aren’t well known at this stage it seems very clear that older people are disproportionately affected, so forcing older people to go back to work before there is a vaccine isn’t going to help them.

When it comes to these discussions I think we should be very suspicious of people who raise issues they haven’t previously shown interest in. If the discussion of reopening businesses seems to be someone’s first interest in the issues of mental health, social security, etc then they probably aren’t that concerned about such issues.

I believe that we should have a Universal Basic Income [3]. I believe that we need to provide better mental health care and challenge the gender ideas that hurt men and cause men to hurt women [4]. I believe that we have significant ongoing problems with inequality not small short term issues [5]. I don’t think that any of these issues require specific changes to our approach to preventing the transmission of disease. I also think that we can address multiple issues at the same time, so it is possible for the government to devote more resources to addressing unemployment, family violence, etc while also dealing with a pandemic.

Leave a Reply

Your email address will not be published.