Correction: A previous version of this post implied employees provide their own health insurance. It has been updated to clarify businesses provide health insurance to their employees.
A new BPC-Morning Consult survey finds that one-third of small businesses that have shed workers as a result of COVID-19 either do not plan to or are unsure if they can re-hire them, pouring cold water on the potential for a speedy, V-shaped economic recovery.
Indeed, infectious disease specialists have cautioned that public life could be upended for several months—if not years—due to the novel coronavirus, depending on when a viable treatment or vaccine hits the market. In the meantime, individuals will likely be required to continue practicing some level of social distancing to slow the spread, meaning that economic growth could be hampered for the foreseeable future.
Meanwhile, small businesses face a complex terrain of rapidly deteriorating economic conditions that threaten their survival, along with new public policies—including the Paycheck Protection Program, emergency paid leave, and expanded unemployment insurance (UI)—that impact their operations and workforce. Our polling suggests that the UI expansion in particular is factoring into employment decisions among both workers and small businesses, enabling and incentivizing businesses to reduce payroll costs and workers to stay home. While right now it is desirable to have such incentives in place, many businesses are struggling to maintain ties with their workforce. Moreover, once the country begins to transition from social distancing orders toward a resumption of business, such benefits could become a barrier to economic recovery.
Many businesses have either laid off or furloughed workers, with expanded unemployment insurance impacting those decisions.
- 28% of small businesses have laid off workers, and 30% have furloughed workers (with roughly 40% taking at least one of these actions)
- Of the employers that laid off workers, 62% say that expanded unemployment insurance played a major (35%) or minor (27%) role in their decision
- Of the employers that furloughed workers, 61% say that expanded unemployment insurance played a major (37%) or minor (24%) role in their decision
Expanded unemployment insurance may be leading some workers to quit.
- 16% of small businesses say that workers have quit due to reasons related to COVID-19
- Of the small businesses that say employees have quit, nearly all (96%) report that at least some workers have quit to utilize expanded unemployment benefits
Although most small businesses have plans to rehire furloughed workers, a significant share either do not plan to bring those workers back or are unsure if they can.
- Most employers plan to rehire laid off (64%) and furloughed (70%) workers
- However, roughly a third of employers do not plan to or are unsure if they can bring back their laid off (36%) and furloughed (30%) workers
- More than three-quarters of small business that provide health insurance have continued to provide that benefit to furloughed workers.
Expanded unemployment insurance is making it more difficult for some small businesses to maintain their workforce during COVID-19.
- While a majority (56%) of small businesses say that expanded unemployment benefits have had no impact on their workforce, nearly a third (32%) say that these benefits have made it more difficult to retain their employees
- Of note, however, is that expanded unemployment insurance is a less significant challenge than declining revenue (74%) and family and child responsibilities resulting from school closures (52%)
The temporary UI expansion passed by Congress as part of the Coronavirus, Aid, Relief, and Economic Security Act includes an across-the-board increase in benefits of $600 per week. The reforms also expand eligibility to self-employed workers, furloughed workers, and those who quit or are unable to work for reasons related to COVID-19. The benefit enhancement is currently scheduled to last through the end of July, while the eligibility expansion continues through the end of 2020.
The additional $600 per week means that a substantial portion of the U.S. workforce can now temporarily earn more from unemployment insurance than from their job. Furthermore, many workers are now eligible for these benefits even if they quit (rather than only being eligible if they are laid off). These benefits are playing a crucial role during the pandemic, when workers are being urged to stay home and state orders have shut down large sections of the economy. They encourage workers to abide by social distancing and provide critical funds to support households, especially those of workers without any paid family leave who must quit to care for children or family members due to school and child care closures.
It is important to recognize, however, that the emergency structure of UI is impacting incentives among employers and employees. Congress should take that into account as it continues to enact policies to help families, workers, and businesses navigate safety, economic, and health needs in the coming months.
BPC, in conjunction with Morning Consult, conducted a survey between April 8-12 of more than 500 business owners and executives who have between two and 500 employees to understand the challenges small businesses are facing during COVID-19, how they are managing their workforce, and the impact that new federal policies, such as emergency paid sick leave, paid family leave, and expanded unemployment insurance, have on their business.