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.
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