Opinion: Michigan's ‘non-essential’ community faces economic peril
Late last month, Gov. Gretchen Whitmer extended her stay-at-home order (first issued on March 23) to June 12 (and her emergency declaration through June 19). And even though this week she eased some of those restrictions, it is worth assessing how her multiple executive order decrees have economically affected “unnecessary” employees and “non-essential” businesses.
Under her executive order, Whitmer has designated “necessary” employees as “critical infrastructure workers” described by the director of the U.S. Cybersecurity and Infrastructure Agency on March 19 in response to the COVID-19 pandemic. This list of critical infrastructure workers includes 14 categories of workers, ranging from first responders to food and agriculture employees to financial service workers.
For those businesses that were considered “essential” by the governor, their workers were to be allowed to leave home confinement only “to the extent that those workers are necessary to sustain or protect life, or to conduct minimum basic operations.” But, in Michigan, who are these “non-essential” businesses and “unnecessary” employees?
Businesses that serve utilitarian consumer needs, such as transportation and groceries, are often viewed as more essential, whereas movies, theater casinos and live entertainment are deemed less essential and more hedonic. These also align with psychologist Abraham Maslow’s hierarchy of needs, which identify needs such as food, water, shelter and security as basic to life, followed by belongingness, love, status and other needs. It appears that the alleged purpose of the “essential/non-essential” business distinction is to reduce human exposure to COVID-19 and lower public health risks to the population. However, there are four aspects of this argument that appear counterproductive.
First, according to the St. Louis Federal Reserve Bank, 21.6% of jobs nationwide are categorized as high contact-intensive, of which 67% are presently included in critical infrastructure categories, i.e. such as health care, food and groceries and transportation-related workers, etc. Hence, by labeling the majority of contact-intensive occupation workers as essential, the categorization does not sufficiently protect us from exposure.
Second, by excluding certain occupations, e.g., such as those employed as barbers/hair stylists, or slot-supervisors, the distinction marginalizes individuals based on their skill, choice of livelihood or industry.
Third, even within sectors, there seems to be a bias against small- and medium-size local enterprises. When these state-level public health guidelines are applied to businesses, the end result appears arbitrary. Why small retail operations that provide similar products are required to be closed while larger, “big box” retailers remain open to the public (operating under specific public health guidelines) and deemed “essential” has yet to be satisfactorily explained.
Last, in Michigan, why are alcoholic beverage retailers and cannabis dispensaries that provide consumer access to recreational substances increasing health risks considered “essential” businesses, but hair salons and houses of worship, which enhance “good grooming” or “spiritual services,” respectively, and socio-emotional well-being in general, classified as “non-essential” (even operating under similar or enhanced public health guidelines) businesses? If the reason is that salons and places of worship are perceived as those with higher risk of exposure, that does not necessarily make them “non-essential.”
Perhaps a two-dimensional classification will help, indicating how (a) essential and (b) contact-intensive or “high-risk” is a business establishment.
Nationally, an April survey by the National Federation of Independent Business reported that 92% of small business employers are affected by the COVID-19 outbreak, and 50% of them would be able to operate their business for two months or less under current economic conditions.
Whitmer has unilaterally — i.e., without formal state Legislature approval — made executive decisions having irreparable consequences on the Michigan economy. Her arbitrary executive branch decision, which creates a state-level de facto “industrial policy,” have designated certain businesses — including major grocery retailers Walmart and Costco — as “winners," and other retailers, such as Kohl’s, a “loser,” as its products — apparel and other non-grocery products — are considered “non-essential.”
What does a Michigan-based, small retail enterprise selling apparel have to do to qualify for equal opportunity public health operating guidelines established for a Walmart, Costco or Kroger? Or a place of worship to qualify for the same public health guidelines as an alcoholic beverage retailer?
In Michigan, the Bureau of Labor Statistics reported in February that the unemployment rate was 3.6% (compared with a U.S. unemployment rate of 3.5%); in April, the state unemployment rate was 22.7% (as compared to a U.S. unemployment rate of 14.7%), a level not seen in Michigan since the Great Depression. In an April Main Street America survey, it was reported that 7.5 million U.S. small businesses will permanently close due to business disruption caused by COVID-19.
Whitmer announced on June 1 that her stay-at-home order for the state’s six remaining regions (which includes 93% of the state’s population) was lifted (under phase 4 “improving”), and retailers and restaurants are allowed to offer dine-in service on June 8 (with capacity limits); gyms, hair salons, indoor theaters and casinos will remain closed, with her goal of shifting the state to phase 5 “containing” before July 4.
The question remains, however: Gov. Whitmer, how many of the 7.5 million U.S. small businesses projected to be permanently closed will be Michigan-based small enterprises?
Thomas A. Hemphill is David M. French Distinguished professor of strategy, innovation and public policy in the School of Management at the University of Michigan-Flint. Syagnik Banerjee is professor of marketing in the School of Management at the University of Michigan-Flint. They wrote this for InsideSources.com.