Economic Impact of COVID-19
It takes strong commerce to build vibrant communities and neighborhoods rely on local tax dollars for those vibrant communities.
No one ever expected or prepared for an unprecedented crisis that is facing us and forcing businesses to close, employees to lose jobs and our worlds being turned upside down. COVID-19, is here and is having a major economic impact both globally and locally.
While the COVID-19 has a direct impact on the physical health of the people in our region it has also begun to take its toll on the economic health of San Diego. We are seeing businesses and organizations forced to shut their doors to limit the spread of the virus on a level never seen before.
Legislators in Sacramento continue to add to the long list of restrictions to communities in an effort to better protect their constituents. As of this morning, below are the mandates that have been implemented in San Diego County.
As mandated by the Governor of California any gatherings/ events of 50 or more people have been banned and postponed. Restaurants have been forced to close their doors to everything except for takeout. Bars, breweries, coffee shops, and wineries have all been closed until the end of March. School Districts have said they are closing their doors until the end of March as well, but may extend well beyond that.
We have also seen many employers throughout the region have their non-essential on-site staff work remotely to reduce their risk of exposure to COVID-19. Additionally, all travel has been discouraged, which is particularly damaging to San Diego considering how important tourism is to our economy.
As a regional Chamber of Commerce, we are hearing directly from members how damaging COVID-19 is to their business. The hospitality industry is already being hit hard with all tourism coming to a halt, from hotels to events. Events have been cancelled entirely, putting businesses that rely on the contracts from events in danger. Employees are being laid off and furloughed because of the shutdowns and this has economically taxed their wages and ability to care for families and responsibilities.
The Chamber recently had to reschedule an event of our own, San Diego Women’s Week to August 24-28th from its original date in March. While the Chamber is not the only one having to cancel, reschedule or postpone events, this is being done globally and having a huge loss of revenue which is tied to lost jobs and wages. As a result of rescheduling Women’s Week, we had to postpone the work for ten separate small businesses, AV crews, florists, caterers, movers, and many others. Events provide a critical revenue stream for many small businesses and that is often their main source of revenue to carry the company or organization.
Employers aren’t the only ones who are feeling pressured as a result of COVID-19, employees have their own unique challenges as well. Families with children are now tasked with finding childcare while they are working. If they are now working remote or usually work from home, they will have to balance caring for their children AND remain a productive employee or, again, turn to outside help.
Business closures and lack of revenues lead to staff hours being cut, or worse yet, the staff being laid off. This will impact all business as there are no dollars to spend and the community will be holding back to provide for their families during this unprecedented situation.
Both scenarios can potentially place families with unexpected financial burdens that can effectively end all non-essential spending, like eating out, buying toys, or other things necessary to keep a local economy healthy.
While we may know how this virus can directly impact us in the short-term, what we don’t know is the long-term effect that will be felt within our communities.
When businesses, organizations, and citizens stop spending money all communities and businesses will suffer. A community's tax base is grown through the revenue generated by the sales tax. When you spend money locally the tax base grows and is then reinvested to fund projects like road repairs and school improvements.
We are also seeing a dramatic spike in online purchasing to avoid contact with people in public places. While this is great to avoid spreading COVID-19, it has a major impact to the overall helth of the region. When we purchase goods online only a fraction of the sales tax stays local, whereas shopping with small businesses means a marginally larger percent of that sales tax stays within our community to be reinvested on local projects.
For small businesses, now more than ever, it is critical that they become innovative and find different ways to connect with consumers. Utilizing technology will be paramount to the success of businesses going forward. Following this crisis, we will see a permanent shift and new normal in the way that business is done.