Report: COVID-19 Business Impact Shows Furloughs, Cut Wages
The Golden Valley Rotary Club held a virtual meeting Tuesday to learn how COVID-19 has impacted local businesses.
Shannon Full, president and CEO of TwinWest Chamber of Commerce, shared reports from Federal Reserve Bank of Minneapolis.
In March and April the Minneapolis Federal Reserve conducted a study on the Ninth District which includes six states: Minnesota, North Dakota, South Dakota, Montana, Wisconsin and Michigan.
The latest report states that businesses in Minnesota and Michigan’s Upper Peninsula had the most negative revenue performance. Revenue shocks have transferred to workforce cuts. Nearly 40 percent of businesses in Minnesota said they have significantly lower staffing levels in April 2020 compared to April 2019.
The Federal Reserve data shows nearly 40 percent of Minnesota businesses reported they had cut wages. Those same business owners also said there is greater concern for the business to return to normal operations.
Among firms that cut staff, about half expect to rehire furloughed workers or at least try to.
Businesses Turn to Grants and Loans
More than 70 percent of businesses said they applied for emergency aid or were in the process of doing so and 52 percent said they received funding. Additional financial resources have been given through other federal and state programs including the Economic Injury Disaster Loan (EIDL) and business recovery funds.
Hennepin County invested $27 million for small business relief and recovery. Another $5 million is being opened up as $5,000 grants to offset business costs of reopening. While grants and loans may assist businesses, Full said it won’t help the employer completely.
“Oftentimes there are programs lifted up from the federal level, the state level, local level. There might be businesses believing that the combination of all of these will make them whole. The reality is those that have the ability to leverage into that, as well as some of these other programs, we still are seeing our companies are not going to be made whole. So, there are going to be negative ramifications,” explained Full.
Research shows that Greater Minnesota tends to have more small businesses (10 or fewer employees). Data suggests that these businesses have suffered more hardships compared to the rest of the Ninth District.
When survey participants were asked if current economic conditions persist, how long could their firm stay solvent, 60 percent of businesses in Greater Minnesota said they would be able to stay solvent for only six months or less. That’s compared to 40 percent of businesses in Minneapolis-St.Paul.
Full said some of the greatest challenges include financial resources, cash flow, child care, returning to the workforce and restrictions on opening. She also explained there’s a lack of desire to return to work because some are getting more with unemployment benefits. Furthermore, businesses are afraid to reopen because of the legal implications that aren’t yet clear.
“From businesses we heard from, they’re concerned about the lack of clarity of guidance. Not the guidance so much on opening, But am I at risk for liability? If someone gets COVID can they trace that back or try to bring that back to the businesses? They are concerned about that,” Full said.
Other challenges include equity in the workplace. Michelle Ness, executive director of the nonprofit PRISM, shared about how each of her employees have different needs when it comes to work life and home balance.
“We’ve got some healthy people who can keep working. We got people with children who are at high risk and wanting to be able to respond appropriately,” Ness said. “Then we get into equity and then we have people with kids and people without.”
“People are in very different stages in their business, stages in their flexibility with their employees. We’re putting together some additional programming around that,” Full said. “At the Chamber we got the leaders of Hospitality of Minnesota and the Retailers of Association coming together just talking about those specific industries.”
Full suggested that some of the next steps for thought leaders would be to support local businesses, become aware of resources to support economic recovery and reach out to organizations and the city to lend your professional expertise and in-kind services.
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