Like the rest of humanity, we media reporters are limited in our access to facts and ideas, and each of us can report on only a small slice of reality. And we each have our own areas of interest.
Colorado Sun reporter Tamara Chuang tackled the complex topic of unemployment claims last Friday, as part of her job as “Tech, Business, Economy” specialist at the Sun.
Her article begins with a brief interview with John Cumalat, owner of Cannon Mine Coffee in Lafayette, CO. Mr. Cumalat fired his staff of seven last Sunday, the day before Governor Polis’ issued an order limiting Colorado restaurants and coffee shops to ‘take-out service only’.
From Ms. Chuang’s article, quoting Mr. Cumalat:
“I told people, ‘Look, I think there’s gonna be a whole lot of unemployed people, so I’m going to let everyone go with the assumption that if things return to some level of normalcy, you’ll be rehired. So keep your keys and try to get toward the front of the line for unemployment,’” said Cumalat, who thought he had given his crew a week’s lead before the spread of the virus put other restaurant and coffee shop workers out of a job. “It accelerated faster than I thought.”
Employers in Colorado make payments into an Unemployment Insurance pool — jointly maintained by the state and federal government — and that pool of money is normally able to provide a temporary income to newly-unemployed persons, so long as they lost their job through no fault of their own (for example, a layoff, reduction in hours, or reduction in pay not related to performance).
By firing his staff of seven on March 15, Mr. Cumalat presumably made them eligible for unemployment insurance.
The following day, every restaurant and coffee shop in Colorado was laying off staff.
From Ms, Chuang’s article:
“Never before in Colorado have we had such a high volume of impacted workers due to the necessary decisions that the governor made for the state of Colorado this past weekend, as well as on Monday,” Joe Barela, executive director of the labor department, said during a news conference on Tuesday, also referencing Polis’ Saturday night order that all Colorado ski areas close for at least a week.
“It’s really forcing hundreds of thousands of Colorado workers into some type of employment status that was different than what it was a few days ago and so, as a result of that, we’re seeing unprecedented volume in our unemployment insurance claim system,” Barela said.
Note the phrase, “hundreds of thousands.”
As of January 2020, Colorado had an employed workforce of about 3.1 million people, working in all kinds of jobs. Mining. Logging. Government. Education. Construction. Manufacturing. Health care. Business services. Retail. Transportation. Leisure & Hospitality.
A few of these economic sectors will be deeply impacted by government orders, based on the theory that “social distancing” will help mitigate the COVID-19 pandemic. Other sectors will feel very little impact.
We don’t expect our school teachers and college professors, for example, to be laid off. We expect education to continue, even though the instruction will be provided ‘virtually.’ We probably don’t expect our local and state government agencies to lay anyone off, for the time being.
We definitely want to see our health care employees remain on the job.
Many other types of employment can continue, with slight adaptations to the “social distancing” theory. We can probably expect mining and logging to proceed without too many hang-ups. The construction industry can probably keep right on building stuff. It seems to me — given the recent orders from Governor Polis — there’s really only one economic sector that is suffering massive layoffs. And it’s the sector that, generally speaking, pays the lowest employee wages.
Leisure & Hospitality. Coffee shops. Ski areas. Hotels. Restaurants. Guided tours. Museums. Theater companies. Musicians. Rafting trips.
According to the US Bureau of Labor Statistics, Colorado employs about 345,000 people in the “Leisure & Hospitality” sector. That’s roughly 10 percent of the total employment in the state.
Mr. Joe Barela, executive director of Colorado’s Department of Labor, mentioned the possibility that “hundreds of thousands” of unemployment claims might be forthcoming. That phrase seems especially ominous, if we have only 345,000 employees in the hardest-hit sector.
Even more ominous, perhaps, if your community has spent the past three decades constructing a local economy built almost entirely around “Leisure & Hospitality.” Like, say, Pagosa Springs?
The basic formula for calculating Unemployment Insurance payments appears to provide a little more than half your regular weekly wages, according to Your Guide to Unemployment Benefits. If you were making $500 a week, for example — a typical wage in Pagosa’s “Leisure & Hospitality” sector — UI payments would appear to be about $300 a week. If your rent is $1200 a month — a typical rent in Pagosa Springs — the situation is not pretty.
But the situation might be even more ominous, depending upon how long Governor Polis keeps the Leisure & Hospitality sector shut down.
From Ms. Chuang’s Colorado Sun article:
But according to state Sen. Chris Hansen, a Denver Democrat, Colorado began this COVID-19 downturn with its unemployment safety net underfunded by more than 30%. The unemployment fund hasn’t adjusted for inflation since the 1980s, he said.
“We were about $400 million dollars behind where we should have been on the unemployment insurance trust fund,” Hansen said, citing numbers provided by the labor department in a December budget report. “That is largely the result of not adjusting the taxable base over many, many years — about three decades, actually, for inflation, which is why we are so far behind.”
…Right now, employers pay premiums based on the first $13,100 of taxable wages, a metric used since the 1980s, he said. If adjusted for inflation, the number should now be $28,000.
“I want to be very clear: We’re not going to run out of money to pay people benefits,” Hansen added. “It’s just likely that we’re going to run out of money in that fund very quickly and have to start borrowing, which means when the economy recovers we’re going to have to pay it back…”