This worldwide pandemic is going to have real issues for companies everywhere. I'm certain the governments worldwide are here to help us out. That was sarcastic, just in case you didn't get it. Of course, much of the current worry about food shortages I hear about in the US would have been ameliorated had our government not stopped supporting efforts at civil defense and encouraging people to have emergency supplies back in the late 70s.
If we look back to 9/11, the other big crisis in my lifetime, what I see was that we had a huge amount of government expansion with the Patriot Act, the Department of Homeland Security and the TSA. I'm expecting the same thing to happen here. Unfortunately, when the government taketh, it rarely giveth back.
But right now, I'm trying to figure out how all the US government legislation is going to affect business. My business, and by association, other businesses we serve.
The bill the US House passed, was opposed by a few Republicans as rushed through. It probably was. I do not believe that many in the Senate read the entire 124 page document. I had to filter through close to 250 bills introduced so far this month to find this on the US Congress Website. Having read it myself, I still cannot wrap my head around much of this legislation exist. Some examples from one section:
- Domestic Violence Provisions? (p77)
- Requirements to employers to update all company's employee handbooks? (p78)
- Penalties to employers if we don't post the new law or if we misapply law? (p80)
Will this help? In some areas, probably, but my feeling is other areas, not so much.
An industry association I belong to posted a nice summary of how the new legislation will affect companies: https://www.securityindustry.
and this is the latest with respect to SBA disaster loans:
https://disasterloan.sba.gov/ela/Declarations/Index
Some of the items mostly to give additional rights to employees in case they get sick and for faster/longer/better unemployment benefits. This will certainly help employees who are certain to lose jobs because of the forced quarantine. I'm not sure how things are in the US, but France just locked people down so they cannot go for a run more than 1km away from their home. My feeling is that significant new restrictions will be coming to the US.
But I don't see the help being all that helpful for employers. What I see are tax credits against payroll taxes that we have to currently pay. Thinking about my company, my biggest costs in order are:
- Employees
- Costs of goods sold
- Marketing / Sales expenses
- Taxes (payroll is only a part of this)
- Rent
- Recurring Expenses
So perhaps payroll tax is a total of 5% of my total outflow. My guess is that much of this "savings" will get eaten up by trying to make sure we are in compliance with all of the new regulations.
There will be a lot of income being lost immediately in many industries:
- Travel - Hotels / Air / Rental Cars
- Clothing Retail / Malls
- Restaurants / Cafes
- Bars / Nightclubs
- Fitness
- Museums / Theme Parks
- Tourist Industries
- Manufacturing
- Weddings
- Trade Shows / Events
- Churches
This is going to result in massive income lost to people in various professions:
- Cooks / Waitress / Waiters / Hostesses / Bartenders
- Retail Sales (Commission/Noncommission)
- Personal Trainers
- Entertainers and support staff
- AirBnB hosts / speculators
- Building / Construction
- Blue collar workers
The people this isn't going to directly affect monetarily will be:
- Government workers (gotta love that guaranteed income!)
- White Collar workers (who can work remotely)
- Agriculture workers (someone's gotta grow the food)
- Hospital Staff (obviously)
And there will probably be some winners (short term):
- Food production / Sales
- Amazon (I'm betting that this will pick up from all other retail, even with the losses)
- Computer Industry - minor gains from more telework
- Broadband Providers
- Internet education and entertainment
Large, healthy companies may have enough in the bank to pay their employees for a while, but it will be difficult to pay them indefinitely with lower incoming revenue. But eventually, this will hit even the safer industries hard.
The problem we are going to see even after the initial pandemic has passed is the huge loss of savings of people in every economy in the EU and the Americas. The majority of people just won't be able to afford to buy things or travel as much. Without travel and tourism, my feeling is that lots of people who speculated in the market on AirBnB being able to provide them income are going to find they have to sell or foreclose. This will depress the real estate market, which they had artificially inflated. And as real estate prices are fairly inelastic going down, I fear a glut in the market as people won't want to sell at prices lower than yesterday, but people will no longer be able to afford these prices.
This is going to result in a very slow recovery for a long time.
So how do we get out of this mess? As I woke up, the US government said they are looking to pump 1 trillion into the economy. But do we need government to fix this problem? Maybe not.
My next entry will address some thoughts.
The problem we are going to see even after the initial pandemic has passed is the huge loss of savings of people in every economy in the EU and the Americas. The majority of people just won't be able to afford to buy things or travel as much. Without travel and tourism, my feeling is that lots of people who speculated in the market on AirBnB being able to provide them income are going to find they have to sell or foreclose. This will depress the real estate market, which they had artificially inflated. And as real estate prices are fairly inelastic going down, I fear a glut in the market as people won't want to sell at prices lower than yesterday, but people will no longer be able to afford these prices.
This is going to result in a very slow recovery for a long time.
So how do we get out of this mess? As I woke up, the US government said they are looking to pump 1 trillion into the economy. But do we need government to fix this problem? Maybe not.
My next entry will address some thoughts.

























