How coronavirus is devastating hourly earners

April 1, 2020 10:36 AM

Scenes of office workers gleefully holding Zoom video conference calls from their dining rooms and late night TV hosts presenting from their kitchens and basements could give the impression that everyone who isn't sick is easily coping with the coronavirus crisis by working from home.

The reality is that millions of hourly employees who work in places such as retail stores, airlines, restaurants, hotels, car washes, and more are out of work for the foreseeable future.

While the $2 trillion stimulus package just signed into law provides enhanced unemployment benefits, it is little solace to those out of work with dim prospects of their jobs returning to normal anytime soon. Even the U.S. Post Office has warned it may need to close in June, according to Fortune magazine, unless it receives emergency funds.

CORONAVIRUS IMPACT: ADDITIONAL COVERAGE

Hourly wage earners are feeling the brunt of the economic slowdown that has come as a result of the coronavirus pandemic. According to a mid-March 2020 coronavirus study by financial wellness benefits provider Branch, over one-third (37%) of hourly workers reported that they were putting in fewer hours and one-quarter (25%) were on leave (paid and unpaid) or lost their jobs. Salaried workers, by contrast, are feeling less of an impact as about half (46%) reported that they are working the same amount of hours as before and 10% also said that they are working more hours.

“It was surprising how quickly the reduction in hours and even layoffs have started to take place,” said Atif Siddiqi, CEO and founder of Branch, a financial wellness benefits provider.

The virus has already affected more than 185,000 people in the U.S. and over 875,000 globally, according to Johns Hopkins University, and it will continue to drive the economy down as more consumers shelter at home. The White House recommends avoiding social gatherings of 10 or more people.

Even the recent U.S. stimulus package that included $50 billion in funds for the airlines may not be enough to forestall layoffs within the sector. In a joint letter by United Airlines CEO Oscar Munoz and president Scott Kirby, the airline stated that despite a 60% cut in seat capacity its passenger load levels were only in the teens to single digits on most flights. The airline is planning on deeper cuts to capacity in May and June. The executives also said that because of the federal stimulus, United will not conduct involuntary furloughs or pay cuts in the U.S. before September 30. What happens on October 1 is anyone’s guess.

Hourly workers are more concerned about putting food on the table and keeping the lights on during the crisis. Based on a mid-March study of U.S. adults by Branch ,over 90% of hourly workers stated that they were most concerned about paying for groceries followed by 76% citing utility bills as a top worry. Paying rent came third, with 60% citing it among their top financial concerns. This may indicate that the immediate needs of eating and keeping the lights on during the crisis are far more important to people than keeping the bank or landlord happy.

“There is a lack of a safety net for these employees. These are big challenges that these employees stated that they will face over the next few weeks — paying for food and electricity. It may sound basic, but it’s now a reality that the hourly workers are deeply concerned about,” said Siddiqi.

Separately, PayActiv, a provider of employer-sponsored earned wage and tip access, announced that it has waived its fees for millions of lower-income and hourly workers effective immediately.

According to data from the U.S. Bureau of Labor Statistics, about 76% of full-time civilian employees have access to some form of paid sick leave, up from 68% five years ago. While some companies provide paid sick leave to hourly employees, either by choice or by requirement due to state or local law, it rarely covers part-time hourly positions.

Based on data from the U.S. Bureau of Labor Statistics, there were 80.4 million hourly workers in 2017 (the latest figures available), representing just over 58% of all U.S. workers. This is further broken down as 60.3 million full-time and 20.1 part-time hourly workers.

Given the pressure on hourly workers when they do fall sick and don’t have paid sick leave, it could be expected that financial solutions allowing workers to receive faster payments for time worked but not yet paid to become more popular. Last October, Branch launched a debit Mastercard that allows hourly workers to instantly access a portion of their earned wages ahead of their periodic paycheck.

It should be noted that emergency paid sick leave was included in the Families First Coronavirus Response Act, which provides all full-time employees paid sick leave for up to 80 hours (10 working days) to recover from coronavirus symptoms. The emergency paid sick leave requirement expires December 31, 2020.

Among the hourly workers hit the hardest by the coronavirus pandemic are those that work in restaurant and hospitality industries. Based on data from a mid-March 2020 coronavirus survey by Branch, just over half (53%) of hourly restaurant employees are working fewer hours. Most restaurants have closed their dining halls altogether, focusing on take-out and delivery, while others have closed all services.

Many consumers may think that by ordering take-out food from a restaurant they are at least keeping the restaurant’s workers employed. The challenge is that closing a restaurant’s dining hall completely cuts out the waitstaff, who are often paid below minimum wage and thus rely on tips.

“It’s super hard for businesses that rely on human interaction. They need to look at what to do during this time. Maybe it’s time to do a deep cleaning of the restaurant. Or redevelop the menu. It’s getting over the initial shock. We will all get through it. The government has a stimulus package. It’s the time to make the most of this time,” said Lillian Roberts, founder and CEO of Xendoo, an online bookkeeping and accounting platform for small businesses.

In the financial services industry, executives are grappling with how to best deal with their employees as they navigate impacts of the coronavirus pandemic.

One of the courses of action being considered by four in ten (41%) executives is to extend paid sick to hourly staff, according to an Arizent survey of financial and fintech executives that was conducted March 19-20.

“What we need to do is not fall into knee-jerk reactions. The government has to shore up small businesses since America is built on small businesses for everything. Your biggest businesses started out as small businesses at one point. The key is for companies to evaluate their own situations and how to react appropriately,” said Roberts.