FEAR FACTOR - Some comments about getting workers back to work.

A lot of stories are an to pop up about $600 added to UI checks and how workers are now not incentivized to go back to work.

Headlines will feature small biz owners legit concerns ab inability to rehire w PPP loans

The PPP - payroll protection plan- loans for small (and some very large) biz require biz to rehire workers while much of the economy is still in a lockdown. That in-and-of itself is problematic, as biz are not likely to really ramp up and bring enough cash to stay afloat.

Lenders must allocate funds w/in 10 days of approving and it must be utilized immediately. The loans are for 8 weeks - 25% for util, rent/mortg & 75% for payrolls. If a biz fails to meet tightening requirements on payrolls, the loan does not covert into a grant.

After 8 weeks, it becomes a loan that may be even harder to repay given how slow and methodical we need to be on ramp up mode to prevent a second wave of outbreaks.

Even firms who rehire and get a grant may find they don’t have enough $ comming in after 8 wks to keep workers.

That means another round of lay-offs in July, just as enhanced UI benefits are expiring. The CAREs Act provisions for UI were designed for a transitory event and end on July 31.

Now look at the worker’s perspective. There are significant number of workers on UI who are low wage and earning more than they could w 1 job. BUT (and this is important), millions had to wait weeks (some still waiting) to get UI benefits. They are still in the hole on bills.

They are also earning less than they were w 2 jobs, lining up for food banks to feed themselves AND afraid of returning to work for fear of getting sick w COVID - they tend to work in high-risk jobs.

A scarcity of PPE, the threat of spreading COVID to family members, limits on paid sick leave funds, lack of health care & a belief they could be laid off again - most Americans see COVID as long term - are additional hurdles to returning to work *too soon.*

Putting the two together means you get workers who are reluctant to return, at least initially and biz that are stuck w a PPP loan instead of a grant. These same biz are also likely to face cash flow problems after 8 weeks. They may return loan or be forced to later default.

Both outcomes fail the goal of keeping biz afloat during COVID crisis. Congress could course correct and make it easier for biz to ramp up in synch with the economy, rehire fewer workers and still get a grant. There will no doubt be changes to UI benefits after July.

We will also need training and investment in our human capital as workers are more permanently displaced by COVID. This is a lesson of the Great Recession, which too many refuse to acknowledge.

Bottom Line: Workers reluctance to return is more nuanced than pay alone.

Fear is a real factor that we have to acknowledge. It will also impact how comfortable customers are in returning to a place of business. If we don’t acknowledge the unique behavioral aspects of this crisis, we will doom ourselves to a worse recession and more muted recovery.