retirement planning services since 1987


Not Enough Paychecks Protected

January 25, 2021

We’ve discussed how the big corporate fish are getting bigger and the gruesome reality that this pandemic is unleashing for small businesses.

A recent National Restaurant Association survey further quantifies the freefall. It revealed how nearly 110,000 restaurants – or about one in every six establishments – have closed their doors nationwide. And without more help, their overall prospects couldn’t be gloomier. Many more will close.

The Associated Press said 9 million people could lose federal jobless aid of about $320 per week without additional stimulus. For many, it’s their only income.

Now, not every company is hurting. This pandemic seems laser-focused on establishments that revolve around personal contact, where customers are seen in-person and sometimes even touched – like restaurants, bars, hotels, hair salons, gyms, spas, shops, and many more. These owners and employees are hurting economically, plus the nature of their business could put them at elevated medical risk of catching COVID-19.

At first, the government response (i.e., the Paycheck Protection Program (PPP)) seemed adequate because it allowed for people and some bills to be paid for eight weeks. But the PPP proved to be more complicated than expected.

Many businesses got nothing. Some that did get money couldn’t use it in ways needed to survive. Then the well ran dry.

Unsurprisingly, larger firms benefited more than smaller firms. It’s the famous 80-20 rule at play – almost all the money went to a small number of program applicants.

An analysis by the New York Times found the top 1 percent of all PPP loans amounted to more than 25 percent of all loan value. The top 5 percent accounted for more than half of all loan value. The money went to big firms:

On top of that, small businesses have been hurt most by inconsistent local orders restricting their operations. It made sense in the Spring. But we’ve learned a lot since and now governments need to be more precise with these orders.

That way, we could avoid the worst of both worlds – economic harm while the virus spreads. And just like restrictions should be more targeted, so should the aid. Get relief to the folks who need it, now!

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