Donutnomics during the Coronaplague

I caught up recently with my source for “Fast-food economics in Massachusetts: Higher minimum wage leads to a shorter work week, not fewer people on welfare”. He owns donut shops and, following minimum wage hikes, had workers asking for their hours to be cut so that they could continue to be eligible for various forms of welfare, including means-tested housing and health insurance subsidies.

What’s going on during coronaplague? “Business is down 50 percent,” he replied. “But we should be able to get a loan from the government that will pay for two months of salaries.”

What’s the main challenge right now? “Almost all of my workers could make more collecting unemployment than by continuing to work for me,” he said. This has created a delicate situation. Given that unemployment is now more lucrative than full-time work, does he lay off the best workers, rewarding them financially for their high effort and dedication to his business? Or does he lay off his least productive workers, thus inadvertently rewarding them financially for their weak efforts and lack of dedication?

How about around the rest of the neighborhood? Other than the supermarket, our town has one source of food that remains open: a pizza and sub shop that has a few tables, but was always primarily a take-out business (it occupies half of a gas station). The owner-chef says that business is down 60 percent.

Readers: Are you as surprised as I was by these numbers? Most donut sales are drive-through and/or takeout to begin with. Wouldn’t people want to escape their houses, enjoy a traffic-free 5-minute trip to the local donut shop, and come back with a delicious coffee and donut? And why are pizza/sub sales down? I have a tough time believing that our neighbors have finally learned to use their $250,000 dream kitchens.

A neighbor is an accountant for small-to-medium-sized businesses here in Massachusetts. He reports that every employer with whom he works is besieged by employees, especially the part-time and low-wage ones. Are they nervous about the future of the economy and want extra hours and overtime pay so that they can save up? No. Like the donut slingers, they want to be laid off because they can achieve a similar or higher spending power by collecting conventional Massachusetts unemployment plus $600 per week from the Federales.

Consider someone who works 25 hours per month at $20 per hour, helping out a retail store during busy hours. That’s $500/month, which would entitle the worker to roughly $200/month in benefits in the event of a layoff. Right now, however, unemployment will pay closer to $2,800/month.

How about a full-time minimum wage worker? Let’s call that 172 hours times $12 per hour = $2,064 per month. Unemployment will pay over $3,000 per month.

I met a 24-year-old who works for a national retail chain that is headquartered in Massachusetts. She has been cut from five days per week in the office to two days per week working from home. “I hope this lasts through the summer,” she said. “I’m making at least $200 extra per week while hardly doing anything.” (She has a 24-year-old friend, meanwhile, who has been terrified by reports of young people cut down by Covid-19. The slender healthy young person will not leave her apartment.)

How typical are these experiences in which an employee actually has a higher spending power by being laid off? “The $600 Unemployment Booster Shot, State by State” (nytimes) says “Workers in more than half of states will receive, on average, more in unemployment benefits than their normal salaries”:

It looks as though there are some strange bedfellows in this table. New Hampshire and New York, for example, are two of the states that offer the highest reward for continuing to work (still a minimal difference in spending power compared to playing Xbox and watching Netflix all day).

One of the main themes of the Bell Curve (1994) is that American society becomes more unfriendly each year to those whose IQ is below average. I wonder if this is being amply proven by the current landscape of work-versus-welfare alternatives. The Bell Curve says that in the old days it wasn’t that helpful to have a high IQ. If you were born a peasant you could think big thoughts while digging for potatoes. It wasn’t that harmful to have a low IQ. If you worked harder you’d get paid more. If you committed a crime, of which there was a short list of easily understood prohibitions, you’d get imprisoned. Our modern world, on the other hand, has thousands of crimes, many of which are non-obvious and/or not regularly punished. Would a person with an IQ of 90 be able to figure out that saying “I didn’t do it” to a law enforcement officer could result in 5 years in prison (Brogan v. United States), more than pleading guilty to killing a fiance in order to get the insurance cash?

Pre-plague Massachusetts already presented a non-obvious landscape for planning out a life of earning. Having a child and living on welfare yields a greater spending power than working at a median wage job (CATO analysis). Having sex with a married dermatologist yields a greater spending power than going to medical school and working as a primary care doctor (our family law). Having sex with three different already-married above-median-income partners and collecting child support from each yields a substantially greater spending power than marrying a median-income partner. Add to all of these we now have a situation in which workers are much better off financially being fired than continuing to work. And, of course, they’re also way better off in terms of exposure to the dreaded coronavirus if they stay home and play videogames or watch TV.

We have a similar situation for business owners. The smartest and most successful business owners had their free government cash arranged within days. They had no trouble figuring out which bank to use, what forms to fill out, etc. (The biggest banks helped the biggest customers, taking advantage of the fact that a hotel or restaurant chain with 100 directly owned locations was considered 100 “small businesses” rather than one big business.) The honest, but not-too-bright, small business operator? He/she/ze/they was mostly out of luck.

How about people who want to collect conventional welfare? Here’s part of an email from our local school:

The events of the COVID-19 emergency may have changed financial circumstances for your family. As a consequence, your students may now be eligible for the Free and Reduced Price School Meals (FRL) program. If they are eligible for the FRL program, the national Pandemic-EBT program may provide additional benefits in the form of food assistance cards.

Details of the Pandemic-EBT program may be found at It is a supplemental program provided through the Massachusetts Department of Transitional Assistance. Eligibility is based on the FRL status, so, if your family circumstances have changed, you may wish to apply for enrollment in the Free and Reduced Price School Meals (FRL) program.

The application form is attached. You may fill out the Word document and upload the completed application file electronically to the Free & Reduced Lunch Application Submission Folder. That is the preferred application method. You could also print out the PDF version, fill it out, sign, and scan it, then upload it electronically to the Free & Reduced Lunch Application Submission Folder. Either method provides for the confidentiality of your information.

So… as long as you have a scanner and/or an Office 365 subscription, free meals will be coming your way! Here’s an excerpt:

Confusing: Each of your six children can be “foster”, “homeless”, “migrant”, and/or “runaway”. If a child has run away, however, how would there be an adult filling out this form?

(The form also says “We are required to ask for information about your children’s race and ethnicity. This information is important and helps to make sure we are fully serving our community.” Dare we ask if the white poverty industry employees will try to prepare ethnically appropriate meals for each child? It will like Clint Eastwood in Gran Torino trying to make Hmong meals for the neighbors?)

Is this truly accessible to a person with a below-average IQ?

14 thoughts on “Donutnomics during the Coronaplague

  1. “Estimates of the current size of the body of federal criminal law vary, although it has been reported that the Congressional Research Service can no longer even count the current number of federal crimes.”

    > Would a person with an IQ of 90 be able to figure out that saying “I didn’t do it” to a law enforcement officer could result in 5 years in prison?

    Not likely, and that’s a very good point. There’s a useful video about the Fifth Amendment and why no one, regardless of their IQ, should ever talk to the police. I find Duane’s speaking style a little annoying with his rapid-fire delivery, but it’s worthwhile nonetheless. 40+ minutes including his guest speaker but the good bits begin at 7:44.

    “You can’t talk your way out of getting arrested, and contrary to what you might suppose if you’ve never studied the rules of evidence, what you tell the police, even if it’s exculpatory, cannot be used to help you at trial.”

    > Readers: Are you as surprised as I was by these numbers?

    No. It’s similar to the anecdotal evidence I’ve seen with the restaurants in my area that have done their best to remain open, which are the minority.

    > Wouldn’t people want to escape their houses, enjoy a traffic-free 5-minute trip to the local donut shop, and come back with a delicious coffee and donut? And why are pizza/sub sales down?

    Are you kidding me? Lincoln is jam packed with devotees of the Church of Shutdown and is telling joggers, bicyclists, casual walkers, inline skaters and skiers to wear masks and jump to the other side of the road to avoid contact with each other. Even if those shops are rigorously disinfecting anything people might touch, I’m surprised there are even 40% of people who will run the gauntlet and risk touching a doorknob, countertop, or breathe in the same vicinity as an asymptomatic infected customer. Let us know if business increases when everyone is wearing masks.

    > “I hope this lasts through the summer,”

    It’ll get juicier of Ro Khanna and Tim Ryan have their way. It looks like their intention is to give everyone over the age of 16 [It also fixes a bug in the CARES Act to ensure college students and adults with disabilities can still receive the payments even if claimed as a dependent] an additional check for $2000 a month in addition to the unemployment benefits they’re eligible for:

    – Every American age 16 and older making less than $130,000 annually would receive at least $2,000 per month.

    – Married couples earning less than $260,000 would receive at least $4,000 per month.

    – Qualifying families with children will receive an additional $500 per child – families will receive funds for up to three children. For example, a married couple making under $260K with 3 kids would receive $5,500 per month.

    ***** Those who had no earnings, were unemployed, or are currently unemployed would also be eligible. ****

    – Those who were not eligible in 2019 or 2018 but would be eligible in 2020, could submit at least two consecutive months of paychecks to verify income eligibility.

    – The Emergency Money for the People Act also expands the program to millions more Americans who were excluded from the CARES cash rebates – such as college students and adults with disabilities who are still claimed as a dependent. The individual will receive the payment and their parent or guardian will receive the dependent credit.

    Also, you don’t need an address or a bank account:
    The Emergency Money for the People Act additionally recognizes that not everyone has a bank or a home address to receive a check – so it allows individuals to get this money through direct deposit, check, pre-paid debit card, or mobile money platforms such as Venmo, Zelle, or PayPal.

  2. > “Fast-food economics in Massachusetts: Higher minimum wage leads to a shorter work week, not fewer people on welfare”

    Yup, and Alan Krueger killed himself. His research from decades ago was being touted literally until the day of his death (and afterward) as supporting the push for higher minimum wages. I don’t think any of the activists cared that using economic research done more than a quarter of a century ago in very specific circumstances was inadvisable. People were marching in the streets! They had his name attached to many of the arguments I read. I’m not a forensic psychologist, but I think it weighed heavily on him.

    “He served as Assistant Secretary of the Treasury for Economic Policy, nominated by President Barack Obama, from May 2009 to October 2010, when he returned to Princeton.”

    • Krueger was two years ahead of former NJ Governor Chris Christie in high school. #TheMoreYouKnow

    • @ScarletNumber: Yes, I’d heard that. Sometimes the world is a very small place. I know someone who knew him quite well.

  3. Your neighbors might feel as I do: take-out food carries additional risk that whoever is preparing it and packaging it (can be multiple folks) may be contagious. How comfortable and practical is it to wear a mask & clean gloves during a 4-5-8 hour shift in food service? Therefore it’s less risky to prepare all of my family’s food at home under conditions I can control. It’s especially painful for me, as I live in a small-town, where I know and love many of the restaurant owners. We routinely walked to various restaurants pre-Covid. So there’s a lot of discussion on the NextDoor listserv about trying to support the local restaurants, as about 50% of them are doing take-out. To my relief, my fav neighborhood Italian (Italian husband/chef and American wife/front-of-house) decided to close during the pandemic. They decamped from Delmarva to Iowa where their grown daughter lives. (I would have been feeling worse not patronizing them during the pandemic.)

    • The quality of whatever had been prepared would suffer under that scenario. Not in the camp that leftovers/re-heated is equivalent to freshly cooked. So if I’m too lazy to cook something complicated, I’d rather just have scrambled eggs for supper during a pandemic. There’s now a glut of eggs, at moderated prices, in Delmarva following massive price run-ups and shortages end-March, so that approach works for me.

  4. Lawsuits and legislation about them are going to be the next big determinant of what businesses do. If you leave your womancave to visit a pizza shop, come down with COVID-19 and die because contact tracing shows you might have picked it up from a pizza shop employee who should have stayed at home, or from a surface the shop should have disinfected, can your family sue? Sounds silly, right?

    I wish this was just a dumb idea I dreamed up, but an hour ago I talked with someone who owns a restaurant in our town. His business is strictly carry-out/delivery, but until a few days ago, they had a few outdoor tables and chairs around the parking lot. They put up signs asking customers not to sit together, but some people were ignoring them, and they were reluctant to shoo them away. Sure enough, someone in town called the Board of Health and lodged a complaint about the restaurant not following social distancing guidelines. The owner told me he was dismantling the tables and storing them, not just because of the guidelines, but because he was afraid of being sued. I laughed that off until I read this:

    “In California, customers have gone after a yoga studio and a massage parlor. A ski resort chain based in Denver also has been sued in the Golden State.”

  5. Donut King should let enough of his below average workers go so that he can afford to pay the better workers the extra they would have made playing xbox. How much can it be really? He should also explain to the people he keeps that when the benefits run out, they will still have their jobs unlike their home bound former colleagues. Just a thought.

    • demetri: I guess your idea makes sense in that he has half of the revenue that he used to have, plus some government hand-out money to pay salaries for whoever he keeps on. But he still has contracts to pay rent to landlords at the same rates, right? Are the margins in fast food franchises fat enough to support significant pay raises? From what I could find just now, it seems that the typical franchise is lucky to earn a 5% profit. And the past few years have been ones of high wage increases here in Massachusetts (the minimum wage has gone up, but the market-clearing wage for a fast food job has generally been higher than the minimum wage anyway). If he raises coffee prices to $4-5 in order to fund higher wages, won’t people say “I will make it at home myself for 15 cents”?

  6. The extra $600 a week is through July only. Get your free cash now or be priced out forever.

  7. “Is this truly accessible to a person with a below-average IQ?”
    I vaguely remember hearing about “facilitators” that help the helpless with the paper (for a stiff fee I presume).

  8. You were a couple of days ahead of the curve posting this entry. Restaurateurs in Fells Point, Baltimore, MD are asking the same questions.

    “Why would you come back to work when you can make more money staying at home?” Patrick Russell, the owner of Kooper’s Tavern in Fells Point, wondered.”

    They run five “sit-down” restaurants and a burger wagon in the Baltimore area that look like nice places: extensive menu (even a wagyu burger!), catering, great beer and wine selection. Their prices are such that the tips are probably generous enough in ordinary times for full-time staff to support themselves, but how long will it take before that’s true again? Meanwhile I’m pretty sure the owners have rents/leases and all their other expenses to pay.

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