If the new coronavirus causes workers to take sick days; customers to stay home; and officials to order quarantines, it will be hard on all American companies. For small businesses, though, it could be catastrophic.
Many of them, like local restaurants and retailers, operate leanly, with tight profit margins and just enough people on staff. They might struggle to provide sick pay at the same time they are encountering slow business because of widespread illness or public caution. Already, businesses in areas where patients have tested positive for Covid-19 are feeling the effects.
At Tucci, an Italian restaurant in Lake Oswego, Ore., one mile from the elementary school that closed when an employee tested positive for Covid-19 on Friday, restaurant business has been down and takeout orders have been up. It suggests that people are staying inside, said Gregg Matteucci, the owner.
“On any given night, if I have even just a couple chefs call out sick, we’re hurting,” he said. If multiple members of his 30-person staff were out, he said, “that would be really, really tough on us.”
“Not only would I have to pay the sick time, I would have to close my doors,” he said. (Oregon law requires employers to provide up to 40 hours of sick leave.)
The economy has been affected by the outbreak in ways large and small, including stock market declines, supply chain backups and company cancellations of business travel and meetings, in the United States and elsewhere. But for small businesses, there could be long-term effects on daily life and work in local communities.
Policymakers in other countries have already put in measures to help small businesses during the outbreak. China — where 70 percent of Beijing restaurants remain closed — has pledged to help small and medium-size businesses by allowing them to defer certain payments and to provide lower rents and interest on loans. Italy has designated several billion dollars in aid, including for tax cuts and credits for companies.
In the United States, some members of Congress are also considering policies to assist small businesses and their employees, including federal loans to cover outbreak-related losses and reimbursement for workers who need to take sick leave.
“Small businesses are on the front line of this crisis,” said Amanda Ballantyne, executive director of Main Street Alliance, a public policy group for small businesses. “The impact on consumer demand can really impact the economy, so we think there’s an urgent need to get planning to local businesses.”
There is no federal law requiring employers to provide paid, job-protected sick leave; 59 percent of small business employees have it. Ten states, 20 cities and three counties mandate it, though it would still be difficult for small employers to pay for days off for many workers at once, or to replace them.
Workers without sick leave, or without enough of it, risk spreading the disease or staying home and losing their job. (The Family and Medical Leave Act provides unpaid, job-protected leave, but only at companies with 50 or more employees.)
Three Democrats in Congress have introduced a bill to provide interest-free loans of up to $2 million to businesses affected by the outbreak. Others have proposed more expansive paid leave to protect workers and businesses. Senator Elizabeth Warren of Massachusetts released a coronavirus response plan that would, among other things, establish a federal fund to reimburse workers for lost wages if they missed work because of coronavirus symptoms.
Other lawmakers have long proposed a national approach to sick leave. The Healthy Families Act would require employers to pay for sick leave. But that bill might not work well for the coronavirus outbreak, since workers would earn sick time over the course of the year, up to 56 hours.
Eileen Appelbaum, the co-director of the left-leaning Center for Economic and Policy Research, which has studied the effects of two local sick leave mandates, said a disease like coronavirus might require a different response from what states have tried so far. “If someone gets the coronavirus, and they are out of work for two to three weeks or they are quarantined, that’s a place for the government to do something,” she said.
The National Federation of Independent Business, a business trade group that has often supported lower taxes and deregulation, is not calling for any changes to current policy. Holly Wade, the group’s director of research, said the organization opposed any mandated sick leave policies, and does not see a need for targeted loans for small business, given current low costs of borrowing.
The Centers for Disease Control and Prevention has advised businesses to do things like require sick employees to stay home; establish sick leave policies that do not punish workers or require a doctor’s note; and ask employees to inform them if their family members are sick. It also suggested that businesses prepare for multiple employees to stay home, including to care for children if schools close, and emphasize hygiene for employees.
For Asian-American-owned businesses, there is an additional risk: discrimination. Representative Judy Chu, a Democrat from Southern California, said Asian-owned businesses in her district had reported a 50 percent drop in business, driven by “dangerous misinformation and xenophobia.”
Wesley Kang, a founder of Nimble Made, a New York-based start-up that makes men’s dress shirts and promotes Asian-American representation in fashion, said xenophobia, coupled with the fact that manufacturing and shipping partners in China were closed, were hurting the fledgling business.
In some cases, public alarm is affecting small businesses even where there is no widespread outbreak or official guidance to stay inside.
At Chuckie Pies, a pizza restaurant in Lake Oswego near the school where the patient with Covid-19 worked, business was down 25 percent on Saturday, said Lisa Shaw-Ryan, the co-owner. Business was also slower at her nearby coffee shop.
If the slowdown continues for too long or gets worse, she said, they could go out of business. “Bigger companies potentially have more resources or other businesses that aren’t being affected and can balance that out,” she said. “It’s potentially devastating for us. Solid information that isn’t fear-driven is very helpful.”
Patrick Day, who runs two board game stores in King County, Wash., the site of the largest U.S. outbreak of the disease, said his business had very little slack to absorb reduced foot traffic or staffing shortages. The company’s profit margin is only 2 percent in a good year, he said. Most nights, his stores host board game tournaments that can draw nearly 100 players, but he said that business had already begun declining this week, after local cases of the disease were announced.
“If we have a few days out for snow, that can be pretty tough, but snow lasts, at worst, for a week,” said Mr. Day, who shares ownership of Uncle’s Games with two partners. “If we have to go longer than that, we’d need to figure out a way to get outside financing to stay afloat.”