Discover more from The 21 Hats Morning Report
This Is Just the Beginning
With omicron, it’s no longer about lockdowns. It’s about finding enough employees to keep the business open.
Here are today’s highlights:
There’s a new $10 billion fund for small businesses.
The sector hit hardest by the Great Resignation isn’t restaurants or health care.
Why didn’t the chip shortage hamstring Tesla the way it did other automakers?
A business owner dumped 91,500 oil-covered pennies in a former employee’s driveway.
The Empowerment Zone Tax Credit can save businesses on hiring: “Any business located in an Empowerment Zone and that also hires employees that live within the Empowerment Zone is eligible for the Empowerment Zone Tax Credit and can claim 20 percent of what is paid to those employees—this is capped at $3,000 per year, per employee. There is no limit on the number of qualified zone employees and they may be employed on a full-time or part-time basis. In addition, businesses who hire residents from within the empowerment zone between the ages of 18-39 are also eligible to receive The Work Opportunity Tax Credit—a business can claim a tax credit of up to 40 percent of what is paid to those employees, capping at $2,400 per eligible employee.”
“Manufacturing, distribution, storage and transportation industries are most commonly found in Empowerment Zones.” READ MORE
The Treasury department plans to spend $10 billion to boost small businesses: “The State Small Business Credit Initiative will direct money to states, territories, and tribal governments for programs that provide venture capital or encourage private lenders to issue loans to small firms. The program revives a policy put into place following the 2007-2009 recession, when banks cut back on lending to small firms. The $10 billion is more than six times as large as the cost of the earlier program, in part because the administration and Congress wanted to dedicate funds to disadvantaged groups, said Adair Morse, the Treasury Department’s deputy assistant secretary of capital access.”
“The groups include racial minorities, rural communities and veterans, according to program guidelines.”
“The State Small Business Credit Initiative initially will set aside $1.5 billion for businesses owned by socially and economically disadvantaged people. Another $500 million was earmarked for businesses with fewer than 10 employees.”
“Holly Hunt, who manages Georgia’s State Small Business Credit Initiative program, said her state planned to use its expected $200 million allocation to expand loan programs it started in collaboration with banks and community lenders during the earlier version of the program and to start a new venture-capital program.” READ MORE
Restaurants are seeking more federal aid: “Nearly two years into the pandemic, U.S. restaurants and bars are dealing with higher costs, accumulating debts and customers fearful of the latest virus variants, according to a letter signed by more than 3,300 operators and sent to Washington lawmakers in December. The restaurant operators said they were in danger of closing permanently if a federal fund adopted last year to assist the food-service industry isn’t replenished soon.”
“‘I can’t go into further debt to salvage this restaurant,’ said Dwayne Allen, owner of the Breadfruit & Rum Bar in Phoenix, who fell behind on his restaurant’s rent after closing the business for long stretches during the pandemic.”
“He said he has to pay his landlord in full by the end of January and has taken out a $48,000 loan to do so.”
“No legislation has been introduced and any bill would likely face resistance from Republican lawmakers, who have said that Congress already doled out too much money to private industries during the pandemic.” READ MORE
The sector hit hardest by the Great Resignation has been manufacturing—even more than restaurants or health care: “The reality is the sector no longer provides the good-paying jobs it once did. From 1976 to 2006, average hourly pay for a rank-and-file factory worker was substantially higher than the average across all industries for nonsupervisory workers. Now manufacturing pay is below average. Pay raises have been especially meager in ‘nondurable’ manufacturing. Food-preparation facilities such as meatpacking plants are a prime example. The pay is low, conditions are harsh, and there have been severe covid outbreaks. As retail stores, restaurants and warehouses hike pay, nondurable manufacturing jobs look less attractive. Average pay for rank-and-file warehouse and transportation workers is now over $25 an hour vs. $22.62 for nondurable manufacturing workers.”
“While some manufacturing jobs are unionized and come with pay around $30 an hour and generous benefits, more and more factories are also employing temporary workers. Temps typically make closer to $20 an hour, with fewer benefits.”
“Workers had almost no leverage during the Great Recession, when jobs were scarce and manufacturers said they needed to cut costs to survive. But things are vastly different now.”
“Workers understand this. There have been about 140 walkouts at manufacturing businesses since the pandemic began, according to Payday Report, which tracks worker uprisings.” READ MORE
THE COVID ECONOMY
The omicron wave is less about shutdowns and more about unavailable workers: “Slashing store hours, temporarily shuttering locations and sending apology letters to customers for long lines and delayed appointments. These are some of the unusual steps that retailers and restaurants are taking as Covid cases spike across the country, fueled by the fast-spreading omicron variant. Companies are no longer worried about state and local governments shutting businesses down. Instead, the businesses are coping with a shortage of workers as people call out sick, get exposed to the virus or scramble to find childcare. And the threat of more supply chain woes looms as the highly contagious variant spreads across the globe.”
“Macy’s cut store hours at locations across the country for the rest of this month. Walmart temporarily closed nearly 60 stores in December in coronavirus hot spots.”
“And other employers, including Starbucks, Chipotle and Nike have been forced to close some of their doors as they simply don’t have enough people to keep them open.” READ MORE
This is what it’s like when hospitals get overwhelmed: “‘At first, there’s just a lot of waiting. Emergency rooms get so full that ‘you’ll wait hours and hours, and you may not be able to get surgery when you need it,’ Megan Ranney, an emergency physician in Rhode Island, told me. When patients are seen, they might not get the tests they need, because technicians or necessary chemicals are in short supply. Then delay becomes absence. The little acts of compassion that make hospital stays tolerable disappear. Next go the acts of necessity that make stays survivable. Nurses might be so swamped that they can’t check whether a patient has their pain medications or if a ventilator is working correctly. People who would’ve been fine will get sicker. Eventually, people who would have lived will die.”
“‘The volume of people presenting to our emergency rooms is unlike anything I’ve ever seen before,’ Kit Delgado, an emergency physician in Pennsylvania, told me.”
“Health-care workers in 11 different states echoed what he said: Already, this surge is pushing their hospitals to the edge. And this is just the beginning.” READ MORE
Omicron absenteeism could cost the U.K. economy $48 billion in January and February: “The projected loss is equivalent to 8.8 percent of gross domestic product and based on government planning assumptions of a 25 percent absenteeism rate, the study conducted by the Centre for Economics and Business Research showed. Even a more conservative estimate of 8 percent absenteeism—which is three times the seasonal average—could result in loss in output of 10.2 billion pounds, or 2.6 percent of GDP. The CEBR said much of the lost output could be made up during the rest of the year.” READ MORE
Citigroup plans to fire unvaccinated employees this month: “Citigroup staff in the United States who have not been vaccinated against Covid-19 by Jan. 14 will be placed on unpaid leave and fired at the end of the month unless they are granted an exemption, a source familiar with the matter said on Friday. The U.S. bank announced its plan to impose new vaccination rules in October and now becomes the first major Wall Street institution to follow through with a strict vaccine mandate.”
“More than 90 percent of Citigroup employees have complied with the mandate so far and that figure is rising rapidly, the source said, adding that the timing of the vaccination mandate would be different for branch staff.” READ MORE
Tesla racked up record sales while other automakers were closing factories: “Tesla and its enigmatic chief executive, Elon Musk, have said little about how the carmaker ran circles around the rest of the auto industry. Now it’s becoming clear that the company simply had a superior command of technology and its own supply chain. Tesla appeared to better forecast demand than businesses that produce many more cars than it does. Other automakers were surprised by how quickly the car market recovered from a steep drop early in the pandemic and had simply not ordered enough chips and parts fast enough.”
“When Tesla couldn’t get the chips it had counted on, it took the ones that were available and rewrote the software that operated them to suit its needs. Larger auto companies couldn’t do that because they relied on outside suppliers for much of their software and computing expertise.”
“Just a few years ago, analysts saw Mr. Musk’s insistence on having Tesla do more things on its own as one of the main reasons the company was struggling to increase production. Now, his strategy appears to have been vindicated.” READ MORE
THE 21 HATS DASHBOARD
Gene Marks Thinks Blockchain is the Story of the Year: This week, Gene says he expects blockchain technology to spawn an explosion of digital transactions and a whole new economy. Does this mean business owners need to understand what a non-fungible token is? And would you buy an NFT of this podcast episode? Plus: tips for inflation-proofing your business. And is the Qualified Small Business Stock exemption a ridiculous loophole or a boon to small businesses?
You can find Dashboard in the 21 Hats Podcast feed.
Don’t try this at home: “The owner of a Georgia auto-repair shop who dumped 91,500 oil-covered pennies in a former employee’s driveway was not just creating a sticky mess that took nearly seven hours to clean up, the U.S. Department of Labor said. He was also retaliating against the former employee for having complained to the department that he had not received his final paycheck, the agency said in a lawsuit that accuses the shop owner of violating federal labor law. The lawsuit represents the latest turn in an employment dispute that gained nationwide attention last year after the former employee’s girlfriend posted a video of the oily pennies on Instagram, attracting the sympathies of thousands of people who said they, too, had contended with difficult bosses.”
“On March 12, 2021, Mr. Walker left the mound of 91,500, oil-soaked pennies on Mr. Flaten’s driveway. On top of the pile, he left a copy of Mr. Flaten’s paycheck with an expletive written on it, the lawsuit said.”
“The next day, Mr. Flaten’s girlfriend posted the video on Instagram. As the penny pile drew widespread news coverage, Mr. Walker posted a message on the shop’s website:”
“‘What started out as a gotcha to a subpar ex-employee, sure got a lot of press,’ the message said, according to the lawsuit. ‘Let us just say that maybe he stole? Maybe he killed a dog? Maybe he killed a cat? Maybe he was lazy? Maybe he was a butcher?’”
“In a statement, the Labor Department called that message ‘defamatory’ and said that Mr. Walker had retaliated against Mr. Flaten in violation of the Fair Labor Standards Act.” READ MORE
THE 21 HATS PODCAST
Bonus Episode: Who’s Running the Business? In the second quarter of 2020, as Covid hit and their clients stopped advertising, Steve Krull and Dan Golden watched helplessly as their marketing agency lost 40 percent of its revenue. And then things got much worse: By the end of the year, both of their wives would be diagnosed with Stage IV cancer. This is a conversation about how Krull and Golden have coped with matters big and small, personal and professional, throughout an experience they compare to being in a knife fight in the middle of a forest fire.
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