Commentary: COVID shutdown hurts the working poor

By Dr. John Stapleford

As of this date, there have been officially 290 COVID-19-related deaths in Delaware out of a population of 982,000. This is a death rate of three one-hundredths of 1 percent (.03%). There have been 7,870 confirmed COVID-19 cases, for an incidence rate of eight-tenths of 1 percent (.8%).

The state government’s response, shutting down large portions of the Delaware economy, has been especially hard on the working poor.

Using the latest full year worth of data for Delaware available from the U.S. Bureau of Labor Statistics (2018), the governor’s closing of “nonessential” businesses for 10 weeks has cut off 69,556 jobs and prevented the payment of $325 million of wages. The annual average wage across the affected industries is $23,386 ($11.50 per hour).

How were these estimates derived?

It was assumed that Delaware restaurants lost 80% of their business. This results in a loss of 25,808 jobs out of a total of 32,260, and over 10 weeks, unadjusted for foregone tips, $96 million in wages. Similarly, it was assumed that hotels and motels lost 90% of their revenue, impacting 4,781 jobs with $25 million of wages gone.

Dr. John Stapleford

Recreation, including performing arts, museums, casinos, fitness centers and bowling alleys, were completely closed, shutting down 9,300 jobs with a loss of $48 million in wages.

The losses of business in retail varied by industry, ranging from just a 20% drop in revenues in motor vehicles and parts, building materials, and food and beverage stores, to 40% for pharmacies, to no revenues for furniture, clothing, sporting good and bookstores. This was a loss of about 27,000 jobs and $142 million in wages.

Finally, personal services, including hairstylists and barber shops, were assumed to be closed for 10 weeks, impacting 3,000 jobs and $15 million in wages.

The totals do not account for losses in proprietors’ income, nor reduced capacity at hospitals and offices of physicians and dentists.

Of the jobs lost during the 10 weeks, 96% paid less than $20 per hour, with average annual wages ranging $15,000 to $37,000. Most of these jobs require, at most, a high school education and provide limited or no benefits. It is unlikely that many of the workers who lost these jobs have significant accumulated savings to fall back upon.

To put these wages into perspective, the average “fair market rent” for a three-bedroom apartment in Kent County in 2020 is $1,493 per month ($17,916 per year) (https://www.rentdata.org).

According to the Consumer Expenditure Survey of the U.S. BLS, housing expenditures for renters average 39% of their after-tax income. That requires a total after-tax income to live in Kent County of $45,900. Beyond housing costs, there are food, transportation, clothing and health care.

Hopefully, in decisions regarding COVID-19 policies, Delaware’s political leaders are cognizant of the short-term and long-term economic consequences for the working poor.

Dr. John Stapleford is the CRI policy director for the Center for Economic Policy & Analysis.