Sky at Moonbow Tipple Coffee & Sweets in Harlan, talking over the plan for Coronavirus precautions with baristas Leah and Hannah
When our family opened a coffee shop in Harlan, Kentucky we had big plans for something that could contribute to the fragile economy of an Appalachian community just beginning to recover from the decades-long loss of coal jobs. We wanted to repurpose a vacant, historic downtown building to give some life to a Main Street that was beautiful but looked forgotten. We wanted to provide a safe gathering space with good internet where people could meet and work. But more than anything, we wanted to create dignified, living-wage jobs. And when we announced our first openings, it was clear that those jobs were needed: we had 96 people apply to be a barista in a town with a population of 1,425.
So perhaps one of the most shocking outcomes of the Coronavirus Pandemic – and especially of the Coronavirus Aid, Relief, and Economic Security Act (CARES) – is that the very people we hired have now asked us to be laid off. Not because they did not like their jobs or because they did not want to work, but because it would cost them literally hundreds of dollars per week to be employed. It is the nail in the coffin of a Main Street business, and our last day open will be Saturday. Let’s talk about why the very program that is supposed to support small businesses is currently helping their demise and take a hard look at the economic realities we are setting ourselves up for.
It is difficult to not know when we can be open regularly again
When we first heard that the Small Business Association (SBA) was offering disaster loans to help small businesses, we were thrilled. For those who aren’t familiar with us, we are a family of two working parents with young children. We cashed in our retirement to start Main Street businesses in both Harlan and Corbin, Kentucky because this is our home and where we are raising our children. We own two historic downtown buildings (including one that we bought for a dollar). We put one to use as an event space that also includes a store that sells local art, while the other is a coffee shop. Until recently we had 5 employees, each paid well above minimum wage; but, even more, we had created community spaces to gather, work, and celebrate. We had spent years building up these businesses, and suddenly their very existence was uncertain.
Like so many other customer-facing small businesses, the pandemic completely rocked our world. You can imagine how painful the closures were for our event venue and retail store. We originally projected that we would lose $45k, but now expect it to be at least $60k. We were able to keep the coffee shop alive by switching to curbside pickup and delivery, but were still operating at a loss. At a time when we lost nearly all of our revenue, we were still faced with regular expenses. We still have to pay utilities, we still have monthly loan payments on the money we borrowed to get started, and we were still maintaining our payroll. And that means we continue to pay over $1,000 in payroll taxes every month. Any loan, any paycheck forgiveness plan—any support at all—would maybe keep us afloat during very rocky times.
We applied for the SBA Economic Injury Disaster Loan (EIDL) Program on the very first day it launched, and from the outset we saw that it was fraught with issues. The application changed 3 times in the first week it was launched, and so did the description of the program. Then came the news of the EIDL Advance, a program that would allow a $10k advance on a loan that would be directly deposited into a bank account. We were fortunate that we knew that to access this money we had to reapply once the streamlined online application became available. Then, when we did reapply, we were told they would receive a confirmation email upon submission. That application was submitted 10 days ago, and we have yet to receive even a confirmation of submission. Also, the promise of the $10K immediate advance has not happened for anyone we know of—including folks like us who applied weeks ago.
The next big announcement was the Payroll Protection Program (PPP). One of our biggest expenses every month is payroll, so the idea of a program that would reimburse payroll was huge. But once the details were released, we realized how little it offered to the small, Main Street businesses in rural America. The way that the program is structured is that the maximum loan/grant is 2.5 times your monthly average payroll in 2019. This means that it offers nothing to the mom-and-pop shops who are run by owner(s) who never pay themselves salary. Most Main Street businesses have working owners and few employees; we count ourselves among the business owners who have never paid themselves a dime. Those small outfits that do have employees have small payrolls. Also, self-employed and independent contracts aren't eligible to apply until April 10, and under the "first-come, first-served" policy, there will be little funds left.
Workers like Hannah would make over twice as much money per week through the Federal Pandemic Unemployment Insurance, without having to take the risks of being out in the public.
But what is really going to kill businesses like ours is the Federal Pandemic Unemployment Compensation (FPUC) program. The bill gives an additional $600 payment for anyone who qualifies for even $1/week in state unemployment. The idea behind this additional payment is that it would provide a lifestyle of a $60,000 annual salary to those who are unemployed during the pandemic. We understand that if you live in Boston or New York City, that a pay of $60k per year might sound like a reasonable amount, but here in rural Kentucky that is a good salary for someone with an MBA or PhD. Suddenly, those who are unemployed in Eastern Kentucky are making more than the average teacher (median pay $53,906), police officer (median pay $41,711), and about the same as a Registered Nurse. They are far surpassing the essential workers on the frontlines who are stocking grocery store shelves or changing bedpans in a hospital as a Certified Nurse Assistant. That person handing out drive-through orders at McDonalds could literally be tripling her income if she was just laid off. The disparity is even greater in rural Kentucky. In Harlan County, Kentucky, for example, the median annual salary is $26,000, less than half of what is now the pay for someone who is unemployed.
What we see coming in rural America is truly frightening. Suddenly, many folks will be making the very best money of their entire lives by being unemployed. And to what end? Literally the only place to spend the money is either Walmart, the dollar store, or a fast-food chain restaurant. Smaller operations like ours are closing daily as the only relief that business owners can get is through unemployment. And all these unemployed folks? They are smart people: they know that the benefits will end and that there will be few jobs when the money runs out. Did you know that people hoarding money is one of the major causes of deflation and was a driving force of the Great Depression? We have created a perfect storm to encourage folks to have unprecedented amounts of money, nowhere but a few low-priced major corporate chains to spend it, and a future uncertain enough to make people want to save up every dime possible. That money is set to run out right at the moment that America will likely be ready to reopen after the major threats of illness abate.
In just three weeks we now have 16 million unemployed individuals who will soon each receive an extra $600 per week from the federal government. Although no small business funds have come through, those unemployment checks have already started. That is $9.6 BILLION dollars per week, from now until July 31st, just looking at the jobless numbers over the last 3 weeks. And all of that given to people at precisely the time that almost all small businesses are closed. When the $600 payments start to flow we are bracing for a complete shutdown of the entire small business community in Eastern Kentucky.
The mind boggles at all the sensible ways that money could have been better spent. What if FPUC just helped maintain previous pay? What if it gave bonuses to frontline workers? What if it actually reimbursed business owners for every dollar they spent on payroll? This list goes on and on.
And that brings us to the bind that we were facing with our own employees. Right now, we are asking our baristas to continue to put themselves at risk for a pay of around $300 per week, when if they were laid off they could be receiving over $700 per week. Why would we do that? We care deeply about our team and started our businesses to make their lives and our community better, not worse. We are going to do the sensible thing and lay them off until there is an equitable incentive for workers in essential businesses and we see the impact of a program that will allow businesses to continue to operate.
More worrisome, we are already starting to see the outcome of social unrest. The current requirements for FPUC in Kentucky are very low, and as someone described it to us “you could say you were a self-employed dog-walker and get paid $600 a week.” We can only imagine how unfair it feels to be stocking shelves for $7.25 an hour at Walmart—making at best $290/week before taxes. Remember, payroll taxes are still being deducted through all of this. And, of course, not only are these workers paid less, they are out there risking infection and even death. Here in Kentucky we have the highest number of deaths per confirmed Coronavirus case, and the perfect storm of public health conditions for more deaths to come.
(Edited to add: Unbelievably, I was contacted by someone who works for Walmart Corporate, who reprimanded me for misrepresenting the pay of Walmart workers. I was told starting salary is $11 per hour. All the same, that employee would be making at most $440 per week before taxes stocking shelves. In Kentucky, this same person would make $364 from the state with the extra $600 from FPUC, making their total $964 per week unemployed. Plus, FICA would not be taken out, which adds an addition 7.65%. Lest you worry too much about Walmart, you should know that their sales spiked 20% in March, the same month that U.S. retail sales suffered the biggest drop on record. And, if my experiences in packed Walmarts are any indication of what is happening around the rest of the country, it must be one of the most dangerous places to work. I have yet to see employees wearing gloves or masks, and social distancing simply is not possible.)
To be clear, we do not mind losing money if it is for the public good. If we lose all we have built and it keeps people alive, we will feel satisfied. And we are not against living wage jobs; in fact, that has been a driving force in everything we have done. What is so painful about this policy is that it pits the workers on the front line versus those who were fortunate enough to be laid off. It also reinforces a precedent in our country where those contributing the least are paid the most. Active duty military, veterans, police officers, nurses, teachers, truck drivers, farmers, and so many other Americans know this trend all too well.
The problem now is the policy had been made law, and that’s “hard to walk back” as we’ve been told by representatives of our elected officials. In short, the horse is out of the barn. So for now, we can wait and see what America thinks of paying people who aren’t working more than those who are (and putting their lives in danger while they do it!). In our opinion, it’s a ticking time bomb for massive civil unrest, widespread labor strikes, food shortages, and a prolonged depression.
Get To Know Us
We are a small family business with one goal: to show the world Appalachian magic through unique food and retail experiences, in a way that nurtures our community and region.
Sky and Geoff Marietta are passionate about rebuilding Main Street businesses in Appalachian Kentucky. Look for some of our blog posts below, or find out more about our start here.
