You might have noticed that not all businesses were losers during the pandemic. Almost universally, big corporate chains did well, or at least much better, than local businesses like your mom-and-pop shops did.
The restaurant business has been no exception. It's a shame that the work many small, neighborhood restaurants put in to survive pandemic shutdown orders might be in vain. These small restaurants might go under anyway because of yet another threat: an inability to incentivize workers to come back to work.
Free government money
If the government pays employees more money to stay home than what those workers could earn by going to work, most workers will probably stay home.
In the case of small restaurants, government stimulus money appears to be incentivizing people to stay home and not work, sort of like paying farmers not to grow crops. The American Rescue Plan allows unemployed workers to receive $300 a week in addition to unemployment money. But 25 states, most of which are considered to be "red" states, are ending this $300 a week benefit in the hopes of getting people back to work. The states ending the program are the following:
- New Hampshire
- North Dakota
- South Carolina
- South Dakota
- West Virginia
Sen. Ron Johnson from Wisconsin called the practice of paying workers more to stay home than what they could earn on the job a "perverse incentive to keep people out of the economy." He cited this statistic in an interview he gave last August: "Depending on which study you look at, either 68% or 5 out of 6 individuals … are making more on unemployment than they did on the job." PolitiFact found this statement to be mostly true. The statistics cited were spot on, but the intent behind the statement, of a disincentive to work due to receiving unemployment money, is not true in all cases, which is the reason for the "mostly true" rating.
Small restaurants can't compete with large chains
Small restaurants become popular from the food they serve, the atmosphere they create, and the excellent service their customers have come to expect. If these small, local favorites can't get the staff they need to keep their customers happy, they'll likely soon lose some or even most of those customers to restaurants that can provide a better dining experience, even if the quality of the food suffers some.
This is what's happening with the big chains. Small restaurant owners say large chain restaurants can lure workers from them by bonuses and higher salaries they can afford to pay (but won't unless they must). With the government essentially paying workers to stay home, though, the large chains must pay more to potential workers than what those potential workers are receiving from the government.
Is the government helping large chains over small businesses?
Chain and fast-food restaurants can usually afford to pay workers more if they must, whereas small, independent restaurants usually can't. As soon as the government free money ends, however, the large chains can probably hire future workers at a lower pay scale, attracting workers who are no longer receiving government money. By then, more small businesses will probably have gone under.
The Millionacres bottom line
Small restaurants that made it through to the other side of lockdown mandates are now facing yet another threat from the government. If you're a fan of small business, you might want to invest your commercial real estate dollars there instead of in big, corporate chain restaurants like Chipotle, Olive Garden, or Applebee's.