For already struggling service sector businesses, the holiday season could have helped mitigate the catastrophe that was 2020. Instead, Gov. Tom Wolf’s new lockdown measures are digging their financial hole even deeper. Even so, it’s still possible for lawmakers to push back and take steps to better our business climate both during and after the pandemic.
Pennsylvanians are struggling under an economic plight that is even more costly than the current health crisis. According to an October Right to Know request sent to Pennsylvania’s Office of the Budget, almost 80 percent of the state’s total Covid-19 spending was dedicated to unemployment compensation. This economic decline is relatively unique in that it isn’t driven by economic factors. Instead, it’s fueled by the societal and government response to Covid-19—and it isn’t hitting everyone equally.
According to a paper from the National Bureau of Economic Research, early in the crisis, high-wage workers experienced a short recession with a quick recovery in just weeks. By comparison, low-wage workers struggled for several months. Their economic vulnerability meant low-income communities were less likely to comply with shelter-in-place ordinances than those in economicallyprivileged areas.
This disparity shows that making communities resilient to Covid requires protecting Pennsylvanians’ livelihoods and public health at the same time. As of 2018, nearly all Pennsylvania businesses were considered small; they comprised almost half of total statewide employment and form the backbone of many communities. These same businesses are the most vulnerable to economic fluctuations.
Pennsylvania’s economic decline is fueled by the societal and government response to Covid-19—and it isn’t hitting everyone equally.
To build back better, Pennsylvania must end subjective business closures. This October, even the state’s Auditor General, criticized Wolf’s rules and secretive business waiver process for arbitrarily determining which businesses would be forcibly shut down.
The latest evidence doesn’t even support the Wolf administration’s approach to mitigating the threat. As a recent paper by Stanford and Harvard economists found, public mandates such as stay-at-home orders only accounted for minimal changes to social distancing and contact rates. In other words, people were taking protective measures before government intervened. The paper also noted that economic activity would have likely decreased without state orders. Though a pandemic-driven economic slowdown was perhaps inevitable, government leaders’ response only worsened the situation.
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A more reasonable solution, then and now, would involve permitting all businesses — in accordance with CDC guidelines — to remain open. This is simple and fair to all businesses, not just a select few.
In the future, lawmakers must also consider Pennsylvania’s regulatory-driven shortcomings — especially in a pandemic. As it stands,Pennsylvania has almost 163,000 individual regulations, making it the state with the 11th-highest number of total restrictions, according to the Mercatus Center’s QuantGov database. These regulations place a disproportionate burden on small businesses.
Fortunately, the state Legislature has introduced numerous bills intended to make these regulations less burdensome. These proposals would reduce the overall number of rules, increase oversight for policies with large economic impacts, and make regulations more transparent for businesses trying to abide by them. Any combination of these reforms would improve the status quo and help Pennsylvania job creators recover from lockdown mandates.
Moving forward, Pennsylvania must address the burdens that the state government places on businesses. This means allowing all businesses that operate safely to remain open without crushing oversight. The alternative is more closures that devastate our communities.
Tirzah Duren is a Policy Analyst for the Commonwealth Foundation, Pennsylvania’s free market think tank. @tzduren