Food services and drinking places within the United States is one of the more vulnerable sectors impacted by the Novel Coronavirus. The vulnerability stems from government agencies at the national, state, and local levels limiting public gatherings and encouraging social distancing. The following examines the economic value of the industry and the potential impact on the Kansas economy.
The food services and drinking places sector accounted for 7.3 percent of all jobs within the Kansas economy in 2018. The 101,000 restaurant related jobs generated 1.6 billion in total wages and accounted for 2.5 percent of all wages within the state.
The most affected subsector within food services and drinking places is full service restaurants. This subsector is expected to be even more vulnerable to the national social distancing effort, as these establishments are designed for eating within the restaurant and not for to-go orders. It was estimated that this subsector accounted for 36% of the broader industry.
To estimate the economic impact of this one sector on the Kansas economy, two scenarios were created. The first scenario assumes that the full service restaurant industry will have a 60 percent reduction in demand for one month. The second scenario assumes that the sector will have a 100 percent reduction in demand for the same time period due to government agencies mandating restaurants to close.
The 60 percent reduction in restaurant demand for full service restaurants will have a direct impact of over 14,500 jobs and 27.5 million in labor income over a one month period. The total impact on the Kansas economy is expected to be just under 18,600 jobs and $44.6 million in labor income. If the coronavirus lasts longer than one month, the impact on jobs would not change, but the other variable will continue to increase.
If all full service restaurants shut down, the direct and total impact on the Kansas economy would be significantly greater. The direct job loss would be over 36,000 with an additional 10,100 jobs impacted within the restaurant supply chain. The direct wage impact was estimated at $68.8 million dollars for one month. If full service restaurants were to shut down for two months, the direct wage impact would double to $137.7 million dollars.
It should be noted that these estimates do not take into account other changes within the Kansas marketplace. For example, one might expect that the reduction in spending on full service restaurants would at least partly be substituted by an increase in demand from grocery stores. Additionally, it does not include any other entrepreneurial efforts of turning a full services restaurant into takeout meals or prepped meals to be cooked at home. The net difference in the impact on the Kansas economy was not estimated.
