The COVID-19 pandemic has impacted more lives than any other crisis in recent US history. Tragically, this ailment has led to the deaths of many people. Unfortunately, the damage to society extends beyond these deaths because the panic about the virus has reached epic proportions. The stock market has had its worst slide since 1987. Multiple professional sports leagues have closed down for the first time in history. Broadway theaters have been closed and conferences in every state have been cancelled. Consumer spending on travel and entertainment has dropped exponentially. Most people recognize that this crisis will have a negative impact on the economy. However, few people realize that COVID-19 fears are having a devastating impact on a unique group of businesses that provide the most jobs in the country.
These businesses, which represent the biggest component of the global economy, have been overlooked by policy makers, ignored by politicians and rarely studied by economists. Family businesses, many of whom are being driven to the brink of failure by COVID-19 fears, are suffering because they are “hidden in plain sight.” People spend a large percentage of their money with family businesses yet they don’t know anything about them or even how they survive with small profit margins. More importantly, the proposed COVID-19 relief measures proposed by Congress ignore the need to help family businesses continue to provide the majority of jobs in the United States.
A family business is generally defined as a company in which a single family has majority ownership of an enterprise. There are more than 5.5 million family businesses in the United States. These businesses are responsible for 57% of the country’s Gross Domestic Product (GDP) and employ more than 98 million people or 63% of the workforce. Unfortunately, most family businesses are “mom and pop” enterprises that, because they receive very little tax and regulation relief, have very thin profit margins. These businesses are the largest employers in the United States yet their needs are rarely discussed in Washington because they do not have the “extra” money that big businesses and unions have to hire influential lobbyists.
Family businesses, because their margins are thin and they cannot afford staff turnover, treat employees better than more profitable companies because they cannot afford to lose employees. Many of these businesses pay a higher percentage of employee health care costs than big businesses and unions. Family businesses often treat employees like “family” and pay for medical bills and funeral expenses of the family members of employees. If the COVID-19 fears continue, and there is no economic relief provided directly to family businesses, thousands of local businesses will close, millions of American jobs will be lost, and many individuals will be pushed into poverty.
The legislation that Congress is offering does a good job of guaranteeing free COVID-19 testing, securing paid emergency leave for coronavirus-related absences, enhancing unemployment insurance, strengthening food security programs and increasing federal Medicaid funding to states. However, these provisions will not help family businesses losing revenue because of COVID-19 fears continue to provide much needed jobs and health care to American employees. To address this major crisis, I believe that federal, state and local governments should do the following to minimize the damage from the national quarantine:
1. Invoke something that I call “Suspended Financial Animation” where all rent and mortgage, insurance and other bills for individuals and businesses are frozen for two months. The government subsidies should be focused on supporting those businesses and individuals who are hurt by the Suspended Financial Animation.
2. Provide municipal based grants to family and small businesses hurt the most by the government’s COVID-19 restrictions.
3. Provide tax credits to family and small businesses that hire new employees during the current pandemic emergency.
4. Approve job retention loans/grants to family and small businesses to prevent business failures and the laying off of employees.
5. Establish a Family Business Certification (like veteran, women-owned and minority certifications) that identifies family owned businesses where two or more family members work full-time in the business. This will identify businesses that can benefit from policies supporting the growth of the major job creators in the state.
The COVID-19 pandemic is clearly a very serious health emergency. However, coronavirus fears are causing significant damage to both the United States and New Jersey economies. When Wall Street “sneezes” family businesses get a “cold.” Now that Wall Street has a metaphorical “cold,” family businesses are getting “pneumonia.” If the government does not provide much needed support directly to family businesses, the country and the state will be in the midst of an economic crisis for years to come even when COVID-19 is contained.