Restaurants Closing, Workers Scrambling
If I had more time, I would have written a shorter letter. Hi friends, I hope you’re staying safe and avoiding public areas. This past week a reader messaged asking why the blogs have become so long (1,000-1,5000 words) if my mission was to deliver digestible slices of information. I have no good answer, so here’s what I’m doing about it: I promise to keep the word count below 750 words (this one’s 741). That only takes 3-5 mins to read. We’ll try it out and hey, if we like it, we will keep it. Now back to healthcare!
Today, the entire medical and public health community is pushing a “flatten the curve” strategy to contain COVID-19 spread. We’ve seen governors and mayors step up their efforts to limit contact. It’s all about limiting the strain on our hospital ICUs and ventilators. Currently, ICUs in urban areas average 64%. As someone who studied Public Health at the University of Michigan (Go Blue!), I’m all for it. Please avoid public contact as much as possible. In lieu of social distancing, I am concerned about my friends working in the services industry, particularly restaurant and bars. That’s what this blog is about.
If people stay home, restaurants will get crushed. It is inevitable. According to the National Restaurant Association (which started in 1919 over a egg price dispute), the restaurant industry projected 2020 sales of $899 billion and employs a staggering 15.6 million Americans (I think sales are going to be a bit lower than projected). Unlike some industries dominated by multi-national corporations who can absorb intermediate losses, 9 out of 10 restaurants have less than 50 employees or the definition of a small business. It’s awfully hard for businesses that average profit margins of 3-5% to survive.
Just last week, The Seattle Times’ reported that at least 50 restaurants and bars (probably greater by now) have closed their doors. Tom Douglas, one of the city’s most celebrated chefs announced a 90% decline in sales due to COVID-19. Therefore, 12 of his 13 popular restaurants were shut down for the next 8-12 weeks (or more). His company, Tom Douglas Seattle Kitchen told approximately 800 people that they were being laid off and should begin to seek unemployment benefits. What is happening in Seattle is going to hit other major cities.
Now losing your job is bad enough. Even worse if it cannot be easily supplemented by “telework” like in restaurants. And my big concern during a pandemic, what about health insurance? It turns out, thanks to Toast’s 2019 Restaurant Success Report that only 31% of restaurants offer medical insurance for employees, while 21% offer dental and 18% offer vision. And even for those who do offer coverage, I’m guessing they have actuarial values of a bronze or silver plan on the ACA exchange (aka: not great).
Well if the average server makes $21,780 per year, it’s tough to pay hundreds of dollars per month for something you might not use. Especially for a young industry, where the U.S. Bureau of Labor Statistics (BLS) states the average age of restaurant employees is 29.4 years old. Lack of funds to support housing, utilities, food, and transportation combined with “young invincible” mentality is a recipe for being uninsured.
Now this potential of uninsured restaurant employees was only compounded by the Tax Cuts and Jobs Act signed in December 2017 by President Trump. This law repealed the individual mandate penalty from the Affordable Care Act (ACA). As a refresher, the individual mandate was meant to encourage young and healthy people to stay insured, to help spread out the cost of sicker people who would enroll and use more services. It is how health insurance companies offset the costs of people seeking insurance because they expect to utilize a lot of medical care.
So, here’s the conundrum. No penalty for being uninsured and the average age of a restaurant employee is around 30. Majority of restaurants don’t offer health benefits to begin with, let alone the ones who do likely have higher deductibles. And icing on the cake, 14 states haven’t expanded Medicaid, which means they’re restricting single adults from gaining coverage. Single-adult servers often make more than the federal poverty level ($12,760 in 2020) and oftentimes unqualified for Medicaid in states without expansion. This all just leads me to be really worried about my friends working in bars and restaurants. Now I need a glass of bourbon and nice Chicago-style deep dish to wash my sorrows away.