The governor is devastating the New Jersey Shore seasonal resort economy
NEW JERSEY SHORE: The Coronavirus has hit hard in New Jersey. Currently, there are more than 150,000 cases and about 11,000 fatalities. While the vast majority of the cases are in the northern part of the state, near New York City, New Jersey Governor Phil Murphy has imposed the same restrictions on every county in the state. Including the New Jersey Shore season resorts.
Southern New Jersey shore resort towns, like Atlantic City, must keep non-essential businesses closed. From closing resort businesses in March, and not re-opening, there will be permanent economic damage. Damage that will lead to poor public health outcomes.
For these seasonal, mostly small businesses there is already significant damage from the Governor’s actions.
Murphy is taking the same counter-productive position as some other governors.
Governor Murphy seems to take a position very similar to the governors of New York, Illinois, California, Michigan, and Pennsylvania. Those governors want to replace individual freedom and individual responsibility with government control and social responsibility.
Each of those states is similarly slow to re-open its economy.
While the delayed opening may not fatally harm businesses in states that operate year-round, for the Jersey Shore seasonal businesses, it is devasting. Unless they open immediately and can operate close to 100% capacity by the July 4th weekend, depressing conditions may exist by fall. (Health Care Workers Are Facing an Emerging Mental Health Crisis)
Over the years, these small businesses have worked very hard to expand their season. Now from Easter to Memorial Day, mostly on the weekends, this “shoulder season” has been used to increase revenue. For many businesses, this accounts for more than 10% of yearly revenue.
That revenue is gone. Then there is one of three big weekends of the season. Memorial Day kicks off the summer and usually draws very large crowds. Revenue from the Memorial Day typically accounts for 10% of annual revenue.
Lost revenue can not be made up.
Even if the businesses opened by mid-June, they will have already lost more than 20% of annual revenue. Waiting until the end of June will further decrease revenue. When the businesses finally open, Murphy will place capacity limits. The bottom line is that revenue will be down by 30% to 50% this year.
That alone will force some businesses to close permanently, simply because they have not generated enough revenue to pay for offseason expenses. Making matters worse, their labor cost is skyrocketing.
Two years ago they paid $8.65 per hour for completely unskilled labor. Now they are paying $11 per hour for completely unskilled labor. That’s nearly a 30% increase in labor cost coupled with a 30-50% loss in revenues.
Even if they somehow survive this year, next year they pay $12 per hour, then $13 the following year, then $14 the year after that and $15 the year after that. This huge increase in completely unskilled labor costs will also force some businesses to close.
What about raising prices?
Someone may ask, “Why don’t the businesses just raise their prices?”
The simple answer is that they can’t. Why? Because the prices are already high. It has to be that way for seasonal businesses that must generate enough revenue in six months to cover 12 months’ worth of expenses.
Small businesses are not the only companies suffering.
The casinos in Atlantic City have similarly been shut since mid-march. Already they have missed critical revenue-generating activities in March, April, May, and now June. Just as Atlantic City’s casino industry was stabilizing, this shutdown may lead to casinos closing permanently.
The Governor’s argument is that both the number of cases and fatalities from the virus will increase if the economy is opened too soon. That is probably right. But the increase in Coronavirus cases will cause less harm than the damage to public health from continuing to keep businesses closed.
Besides, people should have the freedom to make their own choice.
Many people are already anxious and depressed.
Already, according to the Census Bureau, more than one-third of Americans show symptoms of clinical anxiety and/or depression. The number is probably higher at the Jersey Shore, where tens of thousands of workers are unemployed. Many of them are seasonal workers who are mostly idle in the winter but then look forward to working hard during the season.
The Jersey Shore must be opened immediately allowing businesses to be able to get as close to full capacity as possible before July 4th. Otherwise, the local economy will see large numbers of businesses close and high unemployment with increases in alcoholism, drug abuse, domestic violence, depression, and suicide. (Nation’s Top Mental-Health Official Warns Against a Second Coronavirus Lockdown)
The negative effect of that on public health will be worse than the effect on public health from the coronavirus. It’s time to open up the Jersey Shore now.