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MAY 2020

Four things to know: Minnesota’s food and drink industry during the COVID-19 pandemic

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Although the repercussions of the global pandemic have been felt throughout most job sectors, food and bar workers have been hit particularly hard. Here are four things to know.

1. Food- and drink-service job losses are staggering . . . and unprecedented.

Since March 16, nearly 100,000 workers in Minnesota’s food and beverage sector have filed for unemployment insurance—a significant portion of the 656,000 Minnesotans who have filed for income support because of the economic repercussions of the novel coronavirus. This is unprecedented, both in terms of the sheer quantity of people who have lost their jobs and in the suddenness with which they were laid off. The closest period of food and drink sector turmoil was in 2010, when a total of 24,500 people filed for unemployment insurance. But that was for the entire year.

Back in February, the state’s restaurant and bar establishments employed about 192,000 people. The jobs varied, from server to cook to floor managers to dishwashers, but together they represented 7% of Minnesota’s workforce. By the beginning of May, nearly half of these workers had been furloughed, had their hours reduced, or had been laid off entirely. In all likelihood, the actual unemployment numbers are worse. Recent analysis has suggested that many people who qualify for insurance fail to successfully apply because of overwhelmed unemployment insurance systems.

2. The loss of wages are keenly felt.

How much money will these employees lose in wages during this period of under- and unemployment? The short answer is that we can’t say without knowing how long restaurants and bars will remain closed, when they will reopen, and how quickly businesses will rebound. But evidence from past wages can offer insight into the current financial pain that food and drink sector employees are facing.

In 2019, food and drink workers earned $3.9 billion in wages, representing 2% of the state’s total wages of $172 billion. Broken down by week, restaurant and bar workers earned $376, on average. While this was for about 20 hours of work a week, it nevertheless falls far short of the $1,147 in weekly wages that the average worker earned across all industries. It also underscores the financial precariousness many of the workers in this industry had been experiencing before the pandemic and are likely experiencing now.

Understanding how much income Minnesota’s restaurant and bar workers will lose and the effect on the overall economy may help policymakers and social service organizations better target the policy and program interventions they develop to help the people and areas affected by the pandemic.

3. All counties are reeling from these losses, but some are hurting more than others.

Geographically, the losses in wages for food and drink workers will be felt more deeply in some counties than in others. In Cook County, at the tip of the North Shore, nearly 11% of the county’s workforce is employed in restaurant and bar establishments, compared to 7% across the state. And nearly 6% of the county’s wages are paid to restaurant and bar workers, compared to the 2% across the state.

“Our county’s economy is based on tourism,” says Mary Somnis, executive director of the Cook County/Grand Marais Economic Development Authority, explaining that the county of 5,000 residents attracts about a million visitors a year. “Restaurants and bars are just one component. Lodging, retail, outdoor recreation—all of these industries are taking a hit.”

That hit has translated into the largest percentage of workers per county filing for unemployment insurance in the state: 32% at the beginning of May.

Like Cook County, Washington County has a workforce that is made up of a relatively large share of restaurant and bar workers. While Cook County’s workforce has about 300 employees in this industry, Washington County has 9,000. That represents 10% of the county’s workforce.

“We’ve seen a lot of furloughs and closings in this industry, ” says George Stone, manager of the Economic Support Division of Washington County’s Community Services department, which administers the county’s various assistance programs. “And we’ve seen an increase in the amount of people applying for support. The numbers continue to swell.”

4. There are multiple approaches to helping this sector recover.

Some restaurant workers, especially cooks, have been able to maintain employment because of “to-go” food orders. This is good because it puts money into the pockets of those employees, generates revenue for the establishment owners, and maintains a modicum of economic activity in the state.

But for the workers who have lost their jobs, and for the restaurant and bar owners who have temporarily closed or are operating at reduced capacity, help is still needed.

So far, federal legislation has provided about $3 trillion in economic stimulus. The help comes in different forms, including direct payments to individual tax filers and households, and grants and loans to businesses to help them keep the lights on and continue to pay their employees.

But is that enough? The National Restaurant Association, a food-service industry trade association, believes more help is needed, particularly for its sector to get back on its feet. It has developed a “blueprint” with ideas, including:

  1. Tax credits to help restaurants pay for the costs of redesigning their physical spaces to optimize healthy environments (e.g., for physical distancing, enhanced sanitization, employee training, etc.).
  2. Temporary reprieves from paying the taxes associated with the Federal Unemployment Tax Act (i.e., unemployment insurance).
  3. Temporary permission for people who receive Supplemental Nutrition Assistance Program benefits (also known as “food stamps”) to redeem them at restaurants.

In Minnesota, the legislature and governor approved a bill to allow some restaurants to sell beer and wine with a takeout order of food. And some counties, such as Washington County, are waiving fees associated with late property tax payments, a measure that can help some restaurant and bar owners who own their buildings.

How much these measures would help Minnesota’s 10,500 restaurants and bars—and their workers—remains to be seen. For Cook County’s Somnis, the contours of any economic recovery remain a large unknown.

“We really don’t know what it’s going to look like,” she says. “Are we going to open gradually? This is a challenging question.”

About the author

Jacob Wascalus is a research scientist on the Minnesota Compass team. He generates and curates content for the Minnesota Compass website and manages a portfolio of related research projects. He brings experience in research, geospatial analysis, writing, and outreach from previous positions at the Federal Reserve Bank of Minneapolis, the Center for Urban and Regional Affairs, and the Institute for Agriculture and Trade Policy, among others.