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The Guardian

'People are desperate': California shutdown pushes businesses to breaking point

With surging cases forcing drastic state measures, already struggling industries take yet another blowLaurie Thomas had high hopes that her restaurant, Terzo, would be able to stay open this holiday season. Her team had been serving its upscale Mediterranean fare from the restaurant’s San Francisco sidewalk after adjusting to outside-only dining requirements.But as California saw a dramatic surge in Covid cases in recent weeks, Governor Gavin Newsom issued stricter shutdown orders that again restricted businesses and put an end to outdoor dining.Now, thousands of newly constructed outside dining parklets across the state – some which cost tens of thousands of dollars to build – sit empty. Restaurateurs like Thomas are bracing for difficult weeks ahead. Many of them say they won’t survive on takeout and deliveries alone, making another surge in statewide unemployment all but certain.“It is tragic,” said Thomas, who also heads the Golden Gate Restaurant Association, adding that she expected hundreds more restaurants in San Francisco would shut down in the coming weeks, leaving thousands without jobs. Data from San Francisco’s Chamber of Commerce shows up to 85% of bars and restaurants in formerly bustling parts of the city have already closed.California’s new stay-at-home order is a desperate attempt to contain the fast-spreading virus as hospitals in the statenear capacity. The virus has already infected close to 1.5 million Californians and killed more than 20,500, and officials and epidemiologists say Covid has become so prevalent that activities that were relatively safe before now constitute more risk. But for many businesses already reeling from the state’s first lockdown in March, the new restrictions will have an exacting economic toll. That impact is bound to exacerbate an already towering wealth gap between the state’s rich and poor. ‘Some winners but many more losers’During its first shutdown, California was hit with record unemployment, shooting from 5.5% to 16.4% in the first two months of the pandemic, with more than 2.6 million jobs lost. California’s coffers, however, have come out better than expected through the difficult year, bolstered by high-wage earners who were largely unaffected and, in some cases, thrived during the crisis.Low-wage workers employed in the sectors most affected by the restrictions – the once vibrant dining, entertainment and tourism industries – bore the brunt of the downturn.For many families, the blow was slightly cushioned by a federally funded $2.2tn stimulus package that supplemented unemployment earnings with an additional $600-a-week payment, and an eviction moratorium that prevented them from losing housing over failure to pay rent. That stimulus program expired over the summer, however, and the eviction moratorium will run out at the end of the year. With little hope that a second coronavirus relief package of that scale will be passed by Congress before it adjourns on 18 December, the second lockdown will hit hard.Meanwhile, experts warn that many jobs lost this year won’t just reappear once the pandemic ends. “There have been some winners but many more losers from this economically,” said Mark Duggan, a director at the Stanford Institute for Economic Policy Research. “The scarring effects are going to be real,” he said. “It is amplifying inequalities. A hell of a lot of people in California are really struggling –and it’s going to get harder.”Duggan said that people who thought they might be able to return to their jobs after the crisis were being forced to seek new opportunities. He does not think the bulk of lost restaurant, leisure, and hospitality jobs will come back anytime soon.State data released in August showed that close to half of all California small businesses were at risk of shutting down because of the pandemic. Minority-owned establishments were disproportionately affected, the survey concluded, with the number of businesses owned by African Americans dropping by 41%, Latino-owned businesses by 32%, and Asian-owned businesses by 25%. Roughly 36% of immigrant-owned businesses also went under.Restaurants had the hardest time staying open, according to a September analysis by Yelp, which tracks businesses through online consumer ratings. That evaluation cited California as the second-worst state for restaurant closures, behind only Hawaii, and found six California cities were among the 10 metro areas in the country with the most business closures. . An analysis by the National Restaurant Association provided to the Guardian this week predicted 43% of California restaurants would not survive the crisis. ‘People are feeling outright desperate’“In the beginning, restaurateurs were enthusiastic to do their part to slow the spread of Covid,” said Sharokina Shams, a spokesperson with the California Restaurant Association. But since then, her members have shared harrowing stories. Some said they mortgaged their homes to pay rent on their restaurants. Others told her their laid-off workers were living in their cars.“It is the same story of the last eight months,” she said, “only, when you are eight months into a global pandemic and the story doesn’t change, the people who started out frustrated – today they are feeling just outright desperate.”Thomas, the Terzo owner, had to let go of 52 employees last week when the restaurant shut its doors for the season, only retaining five members of her staff to help run her other restaurant, Rose’s Café, for a bare-bones takeout operation. She’s still not certain that businesses will survive.“I had servers crying, telling me last weekend, if they could have just had another week, they would be in a lot better shape,” she said. She supports the state’s attempts to contain the virus, she added, but questioned whether shutting down outdoor dining would have its intended effect. “We just cost people who are living paycheck to paycheck two to four weeks of critically needed compensation.”“We are still clearly very deep into the worst recession in generations,” said Alissa Anderson, a senior policy analyst at the nonpartisan California Budget and Policy Center, adding that California was still down 1.5 million jobs in October – more than what the state lost during the great recession. Anderson added that Black and Latino workers – especially women – have been most affected because they have been historically segregated into the low-paying service industries that had to shut down.“It is important to view the pandemic and the recession through the racial disparities that we saw even before the crisis hit,” she said. “We are just seeing those disparities exacerbated once again.”Even with the promise of the vaccine raising hopes that life could return to normal next year, California’s restaurant workers will still be in for a tough year, said Alan Auerbach, the director of the Burch Center for Tax Policy and Public Finance at the University of California, Berkeley.Auerbach said the recovery could look more like a “K” than a “V” – high earners are expected to thrive, just as quickly as the most vulnerable plunge.“We have lacked a coherent national strategy for dealing with the pandemic and 2021 is probably going to be a pretty tough year for California,” he said.

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