Published on March 21, 2020
The spread of the novel coronavirus throughout the United States is already affecting employees, employers, and the economy. Numerous states, counties, and municipalities are requiring that Americans stay inside, avoid gathering places like restaurants, bars, and gyms, and work from home. These changes in behavior have a sweeping impact—particularly on businesses that depend on in-person interactions—prompting layoffs, lost revenue, and in some cases, business closures. This could mean broader economic changes: higher unemployment, decreased consumption due to lost wages and closures, reduced business investment due to lost revenue, and, ultimately, falling gross domestic product. How prepared are employers to adjust to new working conditions? What industries most directly impacted by recent changes, and what lessons can be gleaned from previous recessions?
Employers are increasingly expected to both offer paid sick leave to employees who have fallen ill and also to support employees in working from home when possible. For some employers, this is already the norm.
Paid sick leave
On March 18, Congress passed the Families First Coronavirus Response Act, which aims to expand support for American families affected by COVID-19 through a variety of government assistance programs. For workers, the law establishes emergency paid leave benefits for employees taking unpaid leave due to coronavirus, expands unemployment benefits, and requires employers to provide roughly two weeks of paid sick leave to employees.
However, the bill exempts businesses with more than 500 employees and some small businesses under 50 employees (only if the provision would “jeopardize the viability of the business as a going concern”) from providing paid sick leave. As of 2019, small businesses employed 27% of private-sector workers, and large employers with over 500 employees employed 48%. However, some of the country’s largest employers, such as Walmart, have stepped forward to expand paid sick leave for employees afflicted with the virus.
Before recent legislation, paid sick leave was already common in some professions. As of 2019, 73% of private-sector workers had paid sick leave, though some occupations are more likely to have it than others. For example, 94% of workers in management and business occupations have access to paid sick leave, as well as 88% of professional workers. In contrast, only 58% of service workers did. Requiring paid sick leave in occupations where it's not the norm will mean significant change for many employers.
After one year of service, most workers (private and public) have between five and nine sick days, though 22% have less than five. Paid sick days are even less common among part-time workers: 34% of which have fewer than five sick days. Paid sick days are also less likely among small business employees. While 32% of employees at large firms (500 or more employees) have 10 to 14 days of paid sick leave after one year of service, only 15% of employees at firms with under 50 employees do.
Work from home
Employers are also increasingly implementing mandatory work from home policies. According to data from the Census’s 2018 American Community Survey, approximately 5% of Americans ordinarily work from home.
Work from home practices vary by occupation—while 7.4% of those in management, business, science, and arts occupations reported working from home regularly, only 2% of those in production, transportation, and material moving occupations did. As coronavirus forces more people to work from home, people in professions where more people already work remotely may have less difficulty transitioning than others.
The rising number of people working from home will rely heavily on to the nation’s telecommunication infrastructure. The Federal Communications Commission (FCC) says that 21.3 million Americans, or 6.5% of the population, did not have access to high-speed broadband internet in 2017 (defined as a connection of at least 25 Mbps for downloads and 3Mbps for uploads). Rural areas particularly lack high-speed access, though the FCC recently focused on increasing access for rural Americans.
Nearly every industry in the country is being impacted by COVID-19. However, food services, hospitality, and other industries and services that rely on person-to-person contact have been particularly hard hit by recent restrictions mandated by local governments as well as the need for social distancing. At least 23 states have issued some form of restriction on restaurant services (typically restricting them to take-out only), and numerous others have issued restrictions on the size of gatherings.
In 2019, over 12 million workers worked at food services and drinking places (namely, restaurants and bars). That’s 8% of the workforce. More than 2 million Americans work in hotels and other accommodations (such as boarding houses), and over 700,000 work in personal care services like hair and nail salons. Even industries that do not employ many Americans, such as spectator sports, provide jobs for over 100,000 individuals each year.
It is also possible to measure how important these industries are by looking at their contribution to gross domestic product (GDP). Food services and drinking places made up an increasing proportion of GDP over the years, from $151 billion in 1997 (1.76% of GDP), to $459 billion in 2018 (2.23% of GDP).
Recession: it’s a term increasingly used in news coverage of COVID-19. A recession is a period of contraction in the business cycle. A recession has not been officially declared, but early signs—a falling stock market, decreased industrial production, weakened consumer sentiment—indicate that one might be on its way.
For example, the week of March 9 – 16 was one of the worst weeks for the S&P 500 market index since 1945. The index fell 12% in one week, shadowed only by the worst weeks of the 1987 and 2008 stock market crises.
Other than a falling stock market, recessions are generally accompanied by large scale job loss and decreased or even negative GDP growth. In the most recent recession, the US labor force decreased by 5.3% from the beginning of the recession to the end. The average percent job loss across the past 12 recessions has been approximately 3% or 4.5 million jobs in our current labor market.
Recessions also typically negatively impact GDP. In the most recent 2007-2009 recession, GDP contracted by about 3% from the beginning to the end of the recession.
While the past several days have seen enormous changes to how the US workforce operates and large swings in the stock market, the full impact of COVID-19 on the economy is uncertain. For example, while the stock market crash in October of 1987 was even more severe than the one the country is currently experiencing, it did not lead to a prolonged recession. Much of the long-term economic impact of coronavirus will be determined by both how many people are infected and successfully treated and by the efficacy of the government’s monetary and fiscal efforts to stimulate the economy.
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