After The Virus: The Seattle Economy Will Need a Massive Reboot

Editor’s Note: This essay originally appeared the blog of Civic Ventures, a Seattle Think Tank, where the author is a writer. He is also the founder/editor of the Seattle Review of Books.

Right now, it’s impossible to tell exactly how bad the economic impact of the coronavirus pandemic will be. Here in Washington state, with many of us staying in our homes while essential personnel put themselves at risk of infection, there’s a sense of being in a slow-motion car crash. Nobody can question the fact that we’re officially in a recession — we’re just waiting to discover the extent of the damage, and how long it will last.

The experts are hard at work collecting unemployment numbers and crunching other data points, but the full damage report is likely months away. Late this week, the Seattle Metropolitan Chamber of Commerce issued a report (PDF) that tries to get a handle on the huge size and scope of the economic challenges coronavirus will leave behind. Their findings are alarming, but they’re grounded in the available data. This isn’t a document intended to panic — it’s to help the Seattle area prepare for what’s coming and to plan a response to match the scale of the problem.

The Chamber’s findings paint a sobering picture of a recession whose immediate impacts will “severely affect roughly 40% of all jobs in King, Pierce, and Snohomish counties, with either wage reduction or temporary layoffs” — more than 400,000 workers. We are still in the early days of the coronavirus pandemic, and it remains to be seen how well we’ve controlled the virus’s spread in Washington state. But even in a best-case scenario,, the Chamber determines, these losses will take “many months” to recover from — at the very least, affecting every single industry “through 2020.”

“Not all businesses will survive this challenge,” they warn.

And Seattleites are not all equally suited to recover from this challenge. While it’s true that coronavirus has touched all our lives, the Chamber has found that its economic effects aren’t evenly distributed. “Lower earning households and wage earners have been affected first,” the Chamber warns, “with typical jobs affected paying on average $38,000 per year.”

Some of the industries and workers who are hardest hit:

• Small businesses. “More than 80% of retail businesses and 72% of food services businesses employ fewer than 20 workers statewide,” with King County skewing even higher. At best, these businesses saw their business cut by at least a fifth before Governor Inslee ordered restaurants and bars to stop dine-in service. We have no idea how much business they’ve lost since that order, but we do know that nearly all of the estimated 336,000 workers who served in the retail and food service industries in Washington state have been affected.
• Independent contractors make up just shy of ten percent of Washington’s workforce — that’s 320,000 people who cite independent contracting as their primary income, and those workers are self-reporting an outsized impact from coronavirus shutdowns.
• According to the Chamber, “tourism employed more than 188,000 workers and generated $24.4 billion in annual spending” last year. Hotel occupancy already fell to 40% by the end of the first week of March. Those numbers will continue to fall off the cliff this week, leaving hotels, cruises, museums, and other tourist activities without revenue.

All told, over 650,000 King County residents will see their positions reduced or temporarily wiped out. And the majority of those workers earned between $15 to $25 per hour, meaning they are especially vulnerable to work stoppages. It will be vital to ensure that these workers have assistance for rent, food, utilities, and resources to get them back on their feet once Washington climbs out of self-quarantine.

But the resources to help those out-of-work people will be painfully low. All these layoffs and lost revenue from tourism and other activities means that our governments are going to be without funds to address this crisis. Washington state has the most regressive tax code in the nation, relying largely on sales taxes to fund services. The Chamber finds that “Seattle’s forecast of revenue for the General Fund for 2020 projected more than $593 million in sales and B&O tax revenues, or 40% of the total annual General Fund revenues.”

Sales taxes, of course, are taking a huge hit right now — as are lodging taxes and other entertainment-based tax revenue, which the Chamber notes is “the largest source” of taxed revenue for the state and the city. This means that local government won’t have the funds it needs to help us recover from the downturn, creating a downward spiral that could stretch the economic negative feedback loop over a much longer period in the region.

The Chamber offers a few ideas for how to address the effects of the economic downturn:

• Loosen lending support for borrowers — both individuals and small businesses.
• Rent and debt relief, offering “significant flexibility for three or more months after the virus is under control (which is an undetermined date at this point.)”
• Major regional employers should “provide direct assistance to small businesses affect[ed] in their area.”
• Government spending that was already underway — for instance, light rail system improvements — should continue as planned and not be shuttered.
• Taxes have to be fixed: the Chamber admits that “New funding sources and new approaches to revenue management will be required” to address the scope of the problem.

It’s true that I’ve disagreed with the Chamber at various times in the past about policies including the $15 minimum wage and secure scheduling legislation. But there can be no doubt that at this moment, the Chamber wants the same result that we all do — a region that bounces back from this economic crisis quickly, through a recovery which creates the best outcome for everyone. We might disagree on some of the fine-tuning of the policies that it takes to help the region recover, but this report is right-on in both its concern about the impact this downturn is going to have on our region’s most vulnerable citizens and the fact that our government doesn’t have the tools necessary to solve the gigantic problem ahead.

The Chamber’s report is clear that we have no historical precedent for the economic hit that this state is about to take. That means we have to keep the scope of the problem in mind at all times, and we must similarly think big with our solutions. The all-encompassing reach of this crisis brings with it an opportunity to remake Washington from the ground up, stronger than it’s ever been before.