Wednesday, April 22, 2020

Employees Refusing to Come Back to Work: Getting More Money From Bailouts


Kurt Huffman of ChefStable LLC reports:
My company works with local chefs to open and operate their restaurants. We are currently a partner in more than 20 of them. We closed our dining rooms March 15, two days before the governor mandated we do so, and had to lay off some 700 employees. We are doing our best to stay alive by providing takeout and delivery service at about half our restaurants. Our goal is to survive until we are allowed to reopen.

Although our limited operations leave us at only 30% of our usual revenue, takeout and delivery has worked better than expected at most locations. After two weeks of getting the systems in place and understanding the challenges of a different business model, we realized that we needed to hire back some of our staff to help with the demand. That proved harder than we expected.

We started making the calls last week, just as our furloughed employees began receiving weekly Federal Pandemic Unemployment Compensation checks of $600 under the Cares Act. When we asked our employees to come back, almost all said, “No thanks.” If they return to work, they’ll have to take a pay cut.

The starting wage for a line cook in one of our restaurants is $15 an hour. These cooks receive at least $1 an hour in tips, so at a minimum they make $16 an hour, or $640 before taxes for a 40-hour week. The overwhelming majority of our laid-off cooks qualified for Oregon unemployment compensation of 1.25% of their annual gross wages weekly, or $416 in our example. The extra $224 a week provides a strong incentive to return to work.

But as of this week, that same employee receives $1,016 a week, or $376 more than he made as a full time employee. Why on earth would he want to come back to work?

This has had the perverse effect of making it impossible for us to hire enough people even for our limited takeout and delivery business at a time of rapidly rising unemployment. It will be an even bigger problem once we are allowed to reopen our dining rooms. And it will persist at least until July 31, when the unemployment bonus expires. I’d have to offer my cooks $25.40 an hour to match what the government is paying them not to work.
If you pay people a lot of money not to work, a lot of people are not going to work.

The current bailout payments that will keep many from work are going to result in less supply but more dollar demand on the other side of the lockdown. This is a prescription for accelerating price inflation.

-RW



9 comments:

  1. But that's great news, isn't it? Now people will have the time and freedom to pursue their hobbies, thereby improving "national happiness."

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  2. First inflation, then war. Looks like Trump started work on step 2 today. Oil rallies, stawks up. Priorities, folks.

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    1. The bad news is.... you could never be happy no matter what he does.

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    2. New around here, huh? When the guy does something right, like set the Olosercare penalty to $0, he gets credit. The real bad news is he only does something right every so often. All the other time he has ceded his presidency to maniacs like Fauci, Pompeo, Mnuchin, etc. All swamp creatures. Thanks for playing, though.

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    3. He could cure cancer and you'd whine that he put oncologists out of business.

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  3. Incentivizing loss of incentive. Good job bureaucrats.

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  4. I believe you could report them, and they would lose their benefits, and have to pay it back. It is illegal to refuse offers for work and still receive benefits. They have to answer the question every week if they turned down an offer for work.

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    1. Not true if you lost your job “due to the corona virus outbreak”.
      They have a whole new set of rules for that. You only have to apply every other week too, instead of the normal weekly application. I don’t think they want people to go back to work.

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    2. Not true at all. There are different rules for this pandemic. I know plenty of people collecting who's jobs are available. Blame the greedy companies who pay slave wages. $15 an hour to sweat over a grill while the owners make millions. Let them fry burgers I'll sit home and collect.

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