Economic Analysis of Stay at Home

April 3, 2020

Executive Summary

 An estimated 805,656 Minnesotans may end up not working if Stay at Home is extended in its
current form. 320,000 of those have already applied for UI.
 The $600 federal “top-off” to UI payments in the CARES act is the game-changer in this analysis
– for workers who can receive it, it incentivizes Stay at Home and, in aggregate, makes many
Minnesotans more money than if they went to work. Unemployed workers will earn up to $255
million MORE every two weeks due to CARES.
 Many industries could return to work with some degree of social distancing. For this analysis,
we assumed that industries with little direct customer contact would be conducive to social
distancing. However, this will vary greatly for individual businesses. By our measure, 61 of the
96 non-critical industries would be able to return with some degree of social distancing.
 If we were to allow businesses to reopen based on their ability to create and meet social
distancing criteria, that could mean we could add back as many as 538,000 jobs and $716.5
million in payroll, assuming every worker who can go back does go back (and every business
that can reopen does reopen).
 Many psychological factors are at play: just because we allow someone to go back to work
doesn’t mean they will, and if they are “forced” to go back but uncomfortable doing so, they
may not be eligible for UI.
 Critical Care workers in low-paid occupations (PCAs, etc.) are a huge vulnerability and the
biggest loser in these projections – they won’t qualify for UI and will get paid less money for
doing harder work without an escape valve, which could cause unrest.
 Other issues discussed in this analysis:
o We estimate about 82,000 self-employed workers may apply for unemployment
insurance.
o Regarding small business closure potential, a study from JP Morgan Chase Institute
found that “29 percent of small businesses were unprofitable, and 47 percent had two
weeks or less of cash liquidity.”
o A list of the top 30 industries affected by the stay at home order starts with restaurants,
leisure & hospitality and retail trade.

Projected Wage Loss of extending Stay at Home under same conditions as today

This analysis assumes:

 Everyone has exhausted their paid leave at this point
 28% of Minnesotans would not be working, across critical and non-critical industries
 60-90% of people who are laid off will apply for UI benefits
 UI benefits mitigate half of the wage loss, since people receive 50% of their weekly paycheck

Table 1: Total wage loss if there was NO paid leave and NO UI Benefits: $1.36B

04/03/20 Commissioner Update DEED Labor Market Information | Regional Analysis & Outreach | mn.gov/deed/data/
 Avg Number No paid leave
Number Annual total weekly % Not not No UI Benefits
of Jobs wages wage working working Lost wages 2 weeks
Total, All Industries 2,904,673 $166,258,965,943 $1,101 28% 805,656 $1,356,058,469
Critical 2,391,017 $142,722,788,658 $1,148 17% 417,686 $723,140,640
Not critical 513,656 $23,536,177,285 $881 76% 387,970 $632,917,829

However, there is a UI system and it pays 50% of wages. If we assume ALL of the 805,656 Minnesotans
apply (the number includes the 300K who already have), wage loss would be $711 million every two
weeks, as shown in table 2.

Given our assumption that 60-90% of people actually will apply, that amount of lost wages would likely
be closer to between $995.9 and $782.5M every two weeks.

Table 2: Wage loss every two weeks under NORMAL unemployment insurance conditions, in which
100% of those eligible apply.

Number Avg. UI Wages Lost in Wages Lost in Wages Lost in

not Benefit 2 Weeks with 4 Weeks with 6 Weeks with
working (Weekly) Regular UI Regular UI Regular UI
Total, All Industries 805,656 $551 $711,379,916 $1,422,759,833 $2,134,139,749
Critical 417,686 $574 $384,422,018 $768,844,036 $1,153,266,054
Not critical 387,970 $441 $326,957,898 $653,915,797 $980,873,695

The CARES act includes an additional $600/week for those 805,656 workers, which shifts the analysis
considerably. If all 805,656 workers apply for and receive UI benefits plus the extra $600, the state
would actually see an increase in total wages of approximately $255 million every 2 weeks (assuming a
UI take-up rate of 60% to 90% the actual increase may be more like $153 to $230 million). See Table 3.

The reason for this increase is because the large number of people who would be projected to be laid
off are employed in industries with relatively low average weekly wages (i.e. restaurants, personal care
services, retail trade); so the $600 weekly addition would be more than what they would have earned if
working.

Table 3: Wage GAIN every two weeks under CARES act unemployment insurance conditions, in which
100% of those eligible apply.

Number Avg. UI Avg. UI Wages Lost in Wages Lost in Wages Lost in

not Benefit Benefit 2 Weeks with 4 Weeks with 6 Weeks with
working (Weekly) + $600 Regular UI +$600 Regular UI +$600 Regular UI +$600
Total, All Industries 805,656 $551 $1,151 -$255,407,880 -$510,815,760 -$766,223,640
Critical 417,686 $574 $1,174 -$116,801,283 -$233,602,566 -$350,403,849
Not critical 387,970 $441 $1,041 -$138,606,597 -$277,213,194 -$415,819,791

04/03/20 Commissioner Update DEED Labor Market Information | Regional Analysis & Outreach | mn.gov/deed/data/
 Economic Analysis of allowing industries conducive to social distancing to go back to work

If the Governor were to relax Stay at Home somewhat and return people to work, he would only do it
for industries who could safely practice social distancing. We looked at every single industry that is
currently not able to work due to Stay at Home, and determined if it could reasonably resume
operations and practice social distancing.

We believe 61 of the 96 non-critical industries would be able to return with some degree of social
distancing. Many of these industries don’t involve substantial customer-employee contact.

Jobs recovered if we relaxed Stay at Home: 538,107

If we were to allow businesses to reopen based on their ability to create and meet social distancing
criteria, that could mean we could add back as many as 538,000 jobs and $716.5 million in payroll,
assuming every worker who can go back does go back (and every business that can reopen does
reopen). That would include about 260,000 jobs regained in non-critical industries (primarily
manufacturing, but also business services and retail trade) and about 280,000 jobs regained in critical
industries.

Table 4: Jobs recovered if firms conducive to social distancing are allowed to return to work: 538,107

Jobs Lost
Jobs Lost at
Based on Jobs Gained
Firms Not
Estimated Back to Work
Establishments Covered Jobs Conducive
Percent with Social
to Social
“Not Distancing
Distancing
Working”
Number Percent Number Percent Number Number Number
Total 174,055 2,904,673 805,661 538,107 267,554
Critical 137,323 78.9% 2,391,017 82.3% 433,711 278,459 155,252
Non-critical 36,732 21.1% 513,656 17.7% 371,950 259,648 112,302
Source: DEED Quarterly Census of Employment & Wages

04/03/20 Commissioner Update DEED Labor Market Information | Regional Analysis & Outreach | mn.gov/deed/data/
 Table 5: Payroll recovered if firms conducive to social distancing are allowed to return to work:
$716.5M

Bi-Weekly
Payroll
Payroll Lost
Gained
Bi-Weekly at Firms Not
Through
Payroll Lost to Conducive to
Total Payroll Bi-Weekly Payroll Workers
Not Working Social
Back to Work
(not incl. UI) Distancing
with Social
Distancing
(not incl. UI)

Number Percent Number Percent Number Number Number

Total $166,258,965,943 $6,394,575,613 $1,356,065,194 $716,526,304 $639,538,890

Critical $141,631,825,193 85.2% $5,447,377,892 85.2% $723,141,164 $464,284,202 $258,856,962

Non-
$24,627,140,750 14.8% $947,197,721 14.8% $632,924,030 $252,242,102 $380,681,928
critical

Source: DEED Quarterly Census of Employment & Wages

Other issues to consider

 How many self-employed people would we expect to file for unemployment insurance, as paid leave
benefits run out?

Factoring in self-employed: In 2017, there were 409,860 people (census bureau count) who reported
some self-employment income (greater than $1,000 in a year); though not all use self-employment as
their primary source of income. Certainly not all would apply. But if 20% (census bureau based on
incorporated/unincorporated; half of the SBA estimate of 40%) of self-employed people applied for UI,
that would add another 81,972 people. In sum, that would push total UI applications up to about
890,000 people (or between 565,000 and 807,000 with a 60% to 90% take-up rate in the traditional UI
population).

 How many businesses might go bankrupt?

This number is not available, and can’t practically be estimated. However, a study from JP Morgan Chase
in 2019 showed that “In the typical community, 29 percent of small businesses were unprofitable, and
47 percent had two weeks or less of cash liquidity.” In Minnesota, about 99.5% of businesses are
considered small businesses (less than 500 employees), so potentially as many as 71,500 businesses
have two weeks or less of cash liquidity.

It is also important to note that bankruptcies are different than closures – you can close a business
without declaring bankruptcy. We are still waiting for the U.S. Bankruptcy Court to update the number

04/03/20 Commissioner Update DEED Labor Market Information | Regional Analysis & Outreach | mn.gov/deed/data/
 of bankruptcy filings with March data – the most current available data is February, which did not show
an uptick in Minnesota yet.

 Industry impact of extending stay at home

Again, this is going to hit some industries (i.e. restaurants, leisure & hospitality, retail trade) much
harder than others. The top 30 industries impacted will account for just over two-thirds of the jobs not
working (see table below).

Percent Estimated
Current Estimated Number
Top 30 Industry Subsectors Estimated to Have Jobs Not Working Number Not Not
due to the StayHomeMN orders of Jobs Working Working
Restaurants 173,506 75% 130,130
Employment Services 59,684 62% 37,004
Traveler Accommodation 33,478 94% 31,590
Other Amusement & Recreation Industries 29,003 94% 27,367
Automobile Dealers 22,687 90% 20,418
Management of Companies & Enterprises 81,230 25% 20,308
Executive, Legislative, & Other General Government Support 73,879 25% 18,470
Building Equipment Contractors 35,679 50% 17,840
Services to Buildings & Dwellings 32,049 50% 16,025
Religious Organizations 32,000 50% 16,000
Personal Care Services 16,027 90% 14,424
Printing & Related Support Activities 20,785 67% 13,926
Clothing Stores 15,150 90% 13,635
Nonresidential Building Construction 14,827 87% 12,899
Building Finishing Contractors 14,817 87% 12,891
Foundation, Structure, & Building Exterior Contractors 14,286 87% 12,429
Other Specialty Trade Contractors 13,712 87% 11,929
Offices of Dentists 16,645 70% 11,652
General Merchandise Stores, including Warehouse Clubs &
30%
Supercenters 37,472 11,242
Residential Building Construction 12,413 87% 10,799
Special Food Services 13,995 75% 10,496
Colleges, Universities, & Professional Schools 50,735 20% 10,147
Drinking Places (Alcoholic Beverages) 10,588 94% 9,991
Sporting Goods, Hobby, & Musical Instrument Stores 10,456 90% 9,410
Scheduled Air Transportation 13,845 60% 8,307
School & Employee Bus Transportation 11,551 70% 8,086
Civic & Social Organizations 16,073 50% 8,037
Other General Purpose Machinery Manufacturing 11,451 67% 7,672

04/03/20 Commissioner Update DEED Labor Market Information | Regional Analysis & Outreach | mn.gov/deed/data/
 Electronics and Appliance Stores 8,058 90% 7,252
Department Stores 23,663 30% 7,099
Source: DEED Quarterly Census of Employment & Wages

04/03/20 Commissioner Update DEED Labor Market Information | Regional Analysis & Outreach | mn.gov/deed/data/