Economics Story Archives - West Virginia Public Broadcasting

Senate Approves New I-73 Corridor Economic Commission

The West Virginia Senate unanimously approved an economic commission to identify funding and development opportunities tied to an interstate highway corridor that would span southern West Virginia.

The I-73 highway corridor is currently under construction in southern West Virginia and legislators are looking to parlay the project into an economic opportunity.

West Virginia’s portion of I-73 would connect the state to highways stretching from Michigan to Myrtle Beach. With the region opened to more out-of-state travelers, lawmakers hope economic opportunities will roll in with them.

On Thursday, the West Virginia Senate unanimously approved SB 354. The bill would create an economic commission to advise local industry leaders on development and federal funding opportunities available to them following the project’s completion.

Sen. Mark Maynard, R-Wayne, said the commission hopes to turn the highway’s construction into an economic opportunity for McDowell, Mercer, Mingo and Wayne counties, which the new corridor will intersect.

He added that the highway construction project would qualify the region for new funding opportunities.

“There’s some federal funding out there available for this that currently the state of West Virginia doesn’t get for highway programs,” he said. “Hopefully we can go after some of that.”

Receiving approval from the Senate, the bill now awaits review from the West Virginia House of Delegates.

“Just by making this [corridor] a real thing, it will solve the economic issues because it will allow interstate commerce,” Maynard said. “At the exit ramps, it will allow development, fast food restaurants and truck stops.”

“The bounds are limitless,” Maynard said.

WVU Professor Breaks Down Historic Inflation

Whether it's at the gas pump or at the grocery store, West Virginians have been feeling the pinch of recent record inflation. But understanding why things cost more in a modern, globalized world can get tricky very quickly.

Whether it’s at the gas pump or at the grocery store, West Virginians have been feeling the pinch of recent record inflation. But understanding why things cost more in a modern, globalized world can get tricky very quickly. Reporter Chris Schulz sat down with West Virginia University associate professor of economics Scott Schuh to better understand higher prices, and how they might come down again.

Schulz: Can you start us off by just telling us what exactly inflation is?

Schuh: Sure, it’s a general rate of increase of the average price level in the entire macro economy. So it takes into account prices of all final goods, goods that go to consumers. We look at the average price level for the whole economy, and we then calculate the growth rate of that average price level, taking into account all goods and services. And that rate of growth of that price level is inflation. Because the price indices jump around month to month, we typically look at the rate of growth over 12 months. So when they say it’s 9% inflation, it’s roughly a 9% increase in goods and services prices over the past 12 months.

Schulz: That kind of leads me into my next question, which is why is inflation so high right now.

Schuh: So there are two schools of thought. One is that inflation is always, everywhere, a monetary phenomenon, meaning that when the rate of growth of money increases, the rate of growth of price of prices increases about the same. A second hypothesis about inflation is that it’s related to the degree of utilization of resources in the economy. So for example, how close are we to full employment? How close are we to the potential output level in the economy?

What’s interesting about our recent episode, however, is that we’ve seen an unusually large rate of growth of money in a very short period of time. From 2020 to 2022, the stock of money grew about 40%. That is off the charts high. To people who favor the monetary hypothesis for inflation, they point directly to that and say, ‘Yeah, maybe 5%, or 7%, or 9%, growth of money wouldn’t have caused high inflation, but 40% is going to always and it’s not going to take very long for that to happen.’ In my opinion I think the evidence is a little bit stronger right now that it’s the monetary growth that’s causing the inflation.

That said there are also complications going on at the same time about things that people call the supply chain. That whole process of production has different prices along the way. And so while we don’t think of those as inflation, they can, if that supply chain gets out of whack, which it seems to be in many places, that can cause the relative prices of different stages of production to go up or down. And right now we’re seeing the pass through of that to final goods inflation as well. So that’s a complicating factor. And it’s very hard to pinpoint exactly how much is monetary, how much is that supply chain.

Schulz: I think the question that everybody who might be listening to this is going to have is how does COVID factor into this?

Schuh: Well, COVID was by far the largest decline in output and the shortest period of decline in output that we’ve seen, perhaps ever, but certainly in the modern post World War Two era, even more so than during the financial crisis. But it rebounded basically within two quarters, which is an unheard of rate of return to high levels of growth. The health crisis caused us to have to reduce production and people just couldn’t go back to work. Well, that’s an issue that we think of in macroeconomics as one of potential output. Normally, potential output is fixed there, and it stays steady for a long period of time. It doesn’t fluctuate.

Unfortunately, in my opinion, monetary and fiscal policy treated this as if it was a demand shock. And they said, ‘Well, outputs are going down so incomes are going down. So we should give people more income and wealth.’ So there were a lot of fiscal transfers, there was monetary stimulus to reduce the interest rate. And what that caused people to do is want to buy more. That’s normally what happens with monetary and fiscal policy when it tries to combat a recession. The problem in this case is we couldn’t produce more. So everything sort of fell apart at once. But the real problem was people had plenty of income and wealth from the stimulus, but they couldn’t buy or get the goods that they wanted. And so we had, as usual, too much money chasing too few goods, and that causes inflation.

Schulz: The big question is, and this is what you and your colleagues have been looking at, is how this is going to impact different people differently. What have you seen in your, in your research, and in your study, about the different impact of this situation?

Schuh: Yeah, the classic mechanism by which inflation affects the economy is on the side of households and consumers. It affects people who have a lot of money, not people who are wealthy or rich, but people who hold a lot of their assets in what we call money like cash, checking accounts, even savings accounts. The number one thing inflation does is it causes interest rates to rise. You need to keep up with inflation otherwise the real value of that money is going to decline. Their balances are going to devalue in real terms because the price level is going up. What they have in their bank account won’t buy as much tomorrow. So this is called the inflation tax on money and it’s very hard for many people, particularly lower income people and people who don’t have skills or the taste for investing in more risky assets. They lose value during inflation, and that’s a big hit on their wealth. At the same time, inflation tends to hit certain types of prices like food and energy, as it’s doing now, that are essential items that people can’t substitute away from. So when those prices go up, that hits directly into people’s budgets, they can’t shift to something else as easily. And so people with lower incomes and lower wealth are going to be disproportionately harmed by the inflation because it hits what we call inelastic goods that they have to buy, and that they have to swallow the price increases. So it’s a big hardship on them.

Schulz: Does that disproportionate impact also carry over into the business sector? For smaller businesses, say?

Schuh: Well, certainly for businesses that maybe say are sole proprietorships, or home businesses or smaller things, they actually have a lot of characteristics that are similar to the typical household. But by and large, business firms don’t have that problem, in part because they manage their assets better, they have people on staff that can do that. So they’re more inclined to be invested in things that would earn a higher return than cash, they would not hold on to cash in an inflationary environment.

What really hurts the businesses with regards to inflation is the difficulty with understanding whether the overall rate of inflation is directly related to their business. So they have to determine, ‘Is my price going up because of inflation? Or is price going up because the relative demand for my product is going up?’ And if they can’t discern that correctly, they may expand output too much, and then crash more later.

One last thing is because of the supply chain, the issues coming overseas, they have to be able to forecast ‘How much are my inputs going to increase? How much can I reasonably commit to produce in light of that uncertainty? How long will the product get here?’ That that sense of uncertainty, which is caused particularly by the supply chain oriented contributions to inflation, are very difficult for firms of all types to manage.

Schulz: This level of inflation that we’re currently seeing, 9%, how does that end? When does it end?

Schuh: Well, most of the time, inflation ends through one of two things, or both. One is a contraction of the monetary money supply. That’s beginning, the Federal Reserve is starting to raise interest rates. The way they’re going to do that is by reducing the amount of money supplied to the economy. The Fed contracting the money supply has virtually always ended in lower inflation. The history of the Fed has been that it typically raises rates too late and often a little too much so that there ends up being a recession.

The second force that brings down inflation is a contraction in output. This is both the monetary and the utilization theories of inflation playing together and building one off the other. As the money supply contracts, interest rates go up. But then because interest rates are higher, people start buying fewer cars, fewer homes, and they start worrying. And then we have a recession, and then demand declines below potential output. And then we have additional downward pressure on prices. So it’s a monetary contraction, followed by a decline in output, usually a recession, that will bring inflation down.

Schulz: Nobody wants a recession, I don’t think. These cycles seem so extreme. In my lifetime, we’ve seen the Great Recession, and now this. It seems like the periods between these cycles are getting shorter and shorter. Is there something that can be done through policy, or more broadly, to kind of normalize things a little bit more?

Schuh: That’s interesting, because from a macro economist’s perspective, there’s almost universal agreement that recessions have become much less frequent in the last 40 years. The average duration of an expansion has been increasing over time. Some of that credit probably goes to better monetary policy, for sure. There are other things in the economy that I think have adjusted like, for example, the ability to manage the supply chain and to reduce large buildups of excess inventory. That’s been a real private sector development that has helped reduce the amount of business cycle fluctuations.

But what sticks in most people’s minds is the last two have been ginormous. One was a financial crisis, which by the way started back in 2007, or eight, and was over by 2010. So it’s now over a decade old. And there was a very, very long period of economic growth and expansion with no recessions. And then we’ve had this pandemic, which was unusual in so many different regards, because it wasn’t really economic, in a sense, it was health oriented and as we talked about was faster and deeper than usual. So we actually see fewer recessions. But the last two have been so big that they stick in our minds as being really bad recessions. And they are, but they’re very uniquely different. So there’s not a one size fits all forecast for what to do, what’s going to happen, what to do about it. They’re each both very different.

Schulz: Is there anything else that we need to know about this?

Schuh: One thing that’s really important is to make sure you keep abreast of what’s actually happening, keeping an eye on that inflation rate and trying to manage your financial resources around that. For example, the Treasury Department recently launched a new type of bond that is ideal for households. It’s a savings bond, similar to what other people have used, but it pays interest based on the rate of inflation. So that might be something that people might want to check out and see to help guard against the issues of the inflation tax that we talked about before. Anytime we’re on the border of a recession, there’s a concern that the probability of becoming unemployed is rising. Bearing in mind as you plan your expenditures, and your savings and your investments, that that’s a possibility. It may lead some people to maybe increase the amount that they save during this period of time in case they become unemployed for a season.

Economist: Gas Tax Holiday Doesn’t Make Sense

West Virginia University professor and economist Heather Stephens recently published an article on why she didn’t think gas tax holidays were a good idea. She spoke with News Director Eric Douglas to explain the reasoning.

Gov. Jim Justice recently declared that the idea of a gas tax holiday in West Virginia was “dead on arrival.” He said he would not ask the legislature to consider it even though several other states have passed them or considered it.

This interview has been lightly edited for clarity.

Douglas: What is a gas tax holiday?

Stephens: If the state wanted to suspend all or part of the current gas tax in West Virginia, they have the legal right to do so, just like lawmakers and the governor can change other taxes in the state. A holiday suggests it’s temporary, right? That it’s not forever, it’s not a tax cut. Temporary tax relief. And that’s what it would be.

Part of the problem right now is that we have high gas prices, everyone sees that they’ve gone up even more in the last month. But there’s also no indication that they’re going down anytime soon. So if we were in a situation where temporarily gas prices were going to be very high, and the state said, “Okay, during this short term hike, we want to give a little bit of relief,” the budgetary implications wouldn’t be so severe. But if the prices are going to stay high, then there’s going to be ongoing pressure once you temporarily cut them to keep them cut. And gas taxes are a major source of infrastructure funding.

A report that came out last year found that West Virginia was 50th in the quality and state of our infrastructure. So to me, thinking about cutting something that brings in needed revenue for something we need to invest in in the state doesn’t make a whole lot of sense.

Douglas: What are the disincentives for doing it?

Stephens: Other than losing this money that generally goes toward infrastructure, the disincentive of a gas tax holiday is that we want people to make decisions in the long run, right? So, if gasoline prices are high, those who can afford it are going to drive less, people who have access to public transit will drive less, people who have enough money can also be thinking about switching out their vehicles to more fuel efficient vehicles – a hybrid or an electric vehicle where you don’t even have to worry about the gasoline prices.

Part of the reason you would never want to cut taxes permanently on gasoline or arbitrarily make the price look cheaper than it really is, is that it takes away this incentive to make adjustments that account for the fact that price is higher. This can have really positive benefits in terms of air quality. If there’s people driving more fuel efficient vehicles, we have less pollution since cars and trucks are one of the major sources of air pollution in terms of addressing climate change.

Douglas: One of the things you and your co-author suggested in the blog post that you wrote was that a gas tax holiday gives equal financial benefit to everybody, but it’s not the same financial benefit to everybody.

Stephens: If we gave out a gas tax holiday, the gas price is still going to be above $4 a gallon. Higher income people are going to be better equipped to say I want to keep paying $4 a gallon. If higher income people don’t switch up their vehicle, the proportion of gasoline as part of their budget is much smaller. Higher income people are better equipped to absorb the higher gasoline taxes into their current budget without making a change.

The research that we did a few years ago shows that as a percentage of your income, people at lower income levels are disproportionately burdened by increasing gasoline prices. We are all paying this higher price, and you may not have access to public transportation as an alternative. So people without public transportation access, people that live in more rural areas and people in lower income levels, tend to bear the burden of higher gasoline prices.

If we really are concerned about working people who have long commutes and don’t have access to other ways to get where they need to go, there are better ways to address that without a gas tax holiday.

Douglas: A number of states have considered sending out $100 gas cards to everybody, so maybe that’s a better way to handle it. But we should aim for lower income people as well – not everybody who’s a driver?

Stephens: Our paper suggests that if you want to avoid affecting the demand for gasoline itself, but want to help people who are most hit, a tax credit or literally a check, like what was done during the coronavirus [pandemic] based on income, is a much cleaner way to address this burden and doesn’t affect people’s driving patterns as much.

One of my colleagues who co-authored a piece with one of her colleagues has also looked at using some of the gas tax revenues to help people below a certain income level purchase more fuel efficient hybrid or electric cars, rather than the sort of tax credits that have been available in the past for that which are just available to anyone. All of those kinds of things could help the people who are the hardest hit by the higher gasoline prices, while making people who can afford it, continue to pay it.

And the other thing we found in our paper, which I think is really important, is that if you only target the relief to people below a certain income level, you use a portion of your gas taxes. And so the rest of the gas taxes are still available for infrastructure versus with a holiday.

Douglas: What is causing the cost of gas to keep increasing?

Stephens: There’s two basic things that are very simple. One is, obviously, the war with Russia. Russia is a major world supplier of oil, which is refined into gasoline. And it’s basically cut off from most of the world market. So basic economics would say, supply goes down, your prices are gonna go up.

The other thing that’s happened is that as the world is opening up, people are kind of finally starting to move around more after two years of COVID-19, the demand for gasoline is up quite a bit as well. I teach my students, supply goes down, prices go up. So you have two factors that are both kind of pushing prices up. And then there’s some reluctance in the oil and gas industry to start doing a whole bunch of new drilling because of two things that have happened in the last 15 years. One, you had the shale boom which then led prices to plummet. And then just two years ago, gasoline futures were at negative prices. So the industry is being a little cautious about how quickly it ramps up.

And I’m actually concerned that labor shortages will actually make it so that even if they try to ramp up, they won’t have the workers to do it. All of those things are keeping prices high. China’s starting to open up. Right now, China’s demand has actually been down.

That’s why there’s not a lot of people that think prices are going down anytime soon.

West Virginia University To Expand Economics Education

Arizona Diamondbacks general managing partner Ken Kendrick and his wife, Randy, are donating $20 million to West Virginia University over the next 10 years to enable its business and economics college to offer new programs.

WVU announced Tuesday that it also will dedicate about $20 million for the creation of the Kendrick Center for an Ethical Economy, which will offer programs for high school students and educators statewide.

University President Gordon Gee said in a statement that the alliance “will help our state retain top young talent in line with West Virginia University’s land-grant mission by aiding teachers in filling economic literacy gaps that exist for students.”

In order to invest in teachers to increase outreach in youth economic education statewide, a specialized track will be established for educators within a master of science in economics program. Summer workshops will focus on economics education for teachers, and mentor teachers will be recruited to support Kendrick Center educators, the statement said.

The program also will recruit high-achieving high school seniors to WVU, and enrollment in a microeconomics course will be expanded for West Virginia high school students, the statement said.

Ken Kendrick is a 1965 WVU graduate.

Marshall Economist Discusses Stimulus In W.Va.

The American Rescue Plan recently passed by Congress will inject about $4 billion into the West Virginia economy and nearly $2 trillion nationwide. But will this cause inflation? And how will it affect economic recovery?

Marshall University Economics Professor Nabaneeta Biswas.

Nabaneeta Biswas is a professor of economics at Marshall University in the Department of Finance, Economics and International Business. She spoke with WVPB’s Eric Douglas to discuss what it will mean to the U.S. economy.

This interview has been lightly edited for clarity.

Douglas: Congress just recently passed the American Rescue Plan (ARP). In really macro terms, what does that mean for the U.S. economy?

Biswas: It’s basically a huge cash injection into the economy. What the government is trying to achieve here is jumpstarting consumer spending. The pandemic has reduced private spending, and the government is trying to replace it with enough public spending, which will then motivate consumers to spend just by putting cash into their hands. Any production activity is usually demand driven. In order to jumpstart production, and create jobs, or at least restore the pre-pandemic level of economic activity and jobs, it is important to expand spending. So it’s a demand shock.

Douglas: I saw recently that West Virginia is expected to receive about $4 billion between the direct payments to households and then money to the state, the counties and municipalities. That’s a huge amount of money flowing into the state. The money to the municipalities and the counties is aimed at infrastructure work. My first thought was, are there enough people to do the work? And is that going to cause the costs of doing that work to increase as there’s this huge demand for infrastructure? Is there potential to cause inflation by this quick infusion of cash?

Biswas: That’s what economic theory suggests, because any cash infusion into the economy always has a multiplier effect. And that’s Keynesian economics, right? And it means that whatever the cash injection is, the demand shock or the expansion in demand would be much larger than the size of the cash infusion. When that happens, there’s always the chance that it would lead to inflation provided that the sectors in which the cash is flowing do not have sufficient production capacity.

Again, imagine that you are injecting cash and jumpstarting spending. In that case, there will be an initial mismatch between demand and supply of services and consumer goods. And that would lead to a temporary increase in prices. But the question then is, how long lasting? And how large would the inflation be? That is the real question.

Douglas: You assume there’s going to be inflation. The unknown is how long does it stick around, and how big of a jump does it cause?

Biswas: And it all depends on how consumers use the money. At the end of the day, if most of the consumers spend the money that they’re getting in consumer goods or paying rent and utility bills, then the demand shock would be much larger, which would lead to a faster rate of recovery, which the plan is intended to achieve. On the other hand, if most of the consumers save the money, then, of course, the demand shock would be much smaller, and it will slow down economic recovery, but then it would also lower inflation. The larger the demand shock, the larger the inflation.

Douglas: We’ve heard a lot of people say that it’s not enough money, we need even more money in the economy. We’ve heard people say, it’s too much and it’s going to cause inflation. Is it enough? Is there an ideal number that you can put your finger on?

Biswas: It’s hard to honestly, and we wouldn’t know whether it was enough, or we overshot it until it actually plays out because it depends on economic agents like you and me and what we do with the money. There’s so many moving parts to this and they have to fit together into a perfect puzzle for the plan to have its desired effect.

In terms of comparing the size, it’s $1.9 trillion, which is almost nine percent of the Gross Domestic Product (GDP) in 2019. If you compare it to the stimulus back in 2009 which was the American Recovery and Reinvestment Act, that was about $850 billion. It was about six percent of the GDP in 2008, which also was smaller than the GDP in 2019. This is definitely a much larger stimulus than we have seen in the past. But having said that, whether it’s going to achieve the task that it’s intended for, it all depends on how agents react.

Douglas: I have heard criticisms of the 2009 stimulus, that it wasn’t large enough, that it didn’t have the desired effect, and it was a much slower recovery than possible.

Biswas: That’s correct. And economists seem to agree on that. Although they also point out that it did lead to a decline in unemployment. So it did have the desired effect, just that it wasn’t large enough, but also you have to note that it was slightly different than the current one in the sense that it did have some public works planned, along with the cash injection.

The government was in the process of creating jobs. That makes it similar to the New Deal, which was on a much, much larger scale than what we have seen either in 2009, or what we’re seeing now. The New Deal was almost 40 percent of the GDP back in those days.

Douglas: This is only a quarter of the New Deal, relatively speaking to the economies of the time.

Biswas: The New Deal is very different from either the 2009 stimulus, or the ARP because the New Deal had a range of federal works programs planned over a period of almost eight to nine years. Not only were the benefits staggered over time, but it also saw a much larger role for the federal government itself in terms of creating jobs and putting salaries into people’s account or their pockets, which is different from the role the federal government is playing under the ARP, except for providing money to local and state governments. That is the part of this plan that is going towards direct investment into productive capacity through job creation.

Douglas: What about the long term? Another one of the criticisms I’ve heard is the long-term debt where we are assuming. What does that mean to the country?

Biswas: Any sort of fiscal debt is definitely not desired. But given the circumstances the nation is facing, it probably makes sense to go big and overshoot rather than undershoot. The federal government has enough credibility to be able to borrow that money in the short term. But we know that eventually, the federal government is going to raise taxes and collect back a lot of the debt that they’re now incurring. So it’s almost like borrowing from the future.

Given that a lot of the households that are receiving the stimulus, but really don’t need it, and aren’t credit-constrained, they’re going to save that money to be able to pay off the future taxes. We know that we are borrowing from the future.

Douglas: Looking forward, I know the president is proposing a massive infrastructure project. What does that mean? Do we need something like that? What would it mean for the country in general?

Biswas: We had very low levels of unemployment before the pandemic hit, which is actually a good thing. But right now, the boost that the ARP gives, and on top of that the infrastructure projects is not actually a bad thing, because it will directly create a lot of jobs. So if the ARP fails to achieve the task, then we have that infrastructure project backing it up. It may be the case that we not only restore the pre-pandemic jobs, but we end up creating even more to put the economy on a higher growth path, than before the pandemic. Of course, having said that, if the productive resources are at full employment, then it becomes harder to create new jobs.

Douglas: There are people who are concerned that the economy could overheat, that there will be such a demand for people for workers that the cost of everything will skyrocket as companies are competing for employees. Are there enough people out of work, who are looking for work, and able to work, to actually support that kind of increase?

Biswas: If you look at the pre-COVID unemployment that was really at one of its lowest levels.The way it’s calculated, it often includes people who move in and out of the workforce and were not officially falling into the unemployed category. In other words, it’s hard to say what the actual size of the workforce is based on just the unemployment statistic that we have.

Compared to what the potential output could have been, what is the shortfall? What is the actual output relative to that? The employment rate is considered a measure, but then it may not be perfect. And if it is not, that’s good news for us. In that case, we have way more unemployed than those who are getting accounted for in that statistic, which means that the infrastructure project would actually help.

Douglas: A lot of this is “We’ll do our best and we’ll figure it out afterwards.” There’s no direct checklist of “we do this, we do this and this happens.”

Biswas: It’s learning by doing and even seasoned economists with years and years of experience in policy-making and implementation could go wrong. There’s always that chance. But the good news is maybe we will revive the economy back to where it was and maybe even take it higher. So we have to be hopeful.

Douglas: Is there anything that I haven’t touched on that that you want to mention?

Biswas: The thing I would like to say is that I know we have been worrying about not only the large size of the stimulus but also whether there’s proper targeting; is the money going to people who really need it? One good thing about this plan, I would say is that it’s a bottoms-up approach instead of a trickle-down approach that we might have seen in the past.

Here the idea is the bulk of the cash injection should go to the lowest income quintile. We are expanding from the bottom upwards. Especially in these times when we have been talking about inequalities and we’ve seen how the pandemic has exacerbated wealth inequalities or income inequalities and affected certain subgroups of the population more than others, this plan actually considers that wealth gap and at least attempts to reduce it so that’s that’s a good thing.

Adopt A Server: Patrons Help Ohio Valley Restaurant Workers Weather Pandemic Holidays

Stay-at-home mom Sarci Eldridge has a big heart. So when Kentucky entered its second round of restaurant restrictions due to the coronavirus pandemic, her first thought was for her favorite server, Jessica Carey.

“Me and my mom were talking, and we were just like, you know, we should just get Jessica something to get her through the holidays,” Eldridge said. “Some gift cards and stuff. She has a little boy.”

Carey has been a server and a bartender at Tex-Mex chain Chuy’s in Lexington, Kentucky, for about seven years. She loves the Eldridge family, too. “I was going through a lot of stuff when I met them, and she and [her husband] Nate and her mom were just so sweet to me, and always seemed to know when I needed a hug.”

Carey was surprised when, out of the blue, she received a message from Eldridge asking what her son, Dain, wanted for Christmas. But after months of reduced hours and meager unemployment benefits, Carey needed the help.

“So I sent her a super small list, it was just like four things I think.”

Eldridge posted about the exchange on her personal Facebook page, she said, and it blew up. “I had some people go, like, ‘Oh, that’s a really good idea, I should do something for my favorite server.’”

A few days later, Eldridge started a Facebook group based on the idea, which she called “Adopt a Server Kentucky.” Within a few days, it had hundreds of members; within a month, four thousand. Some were generous Kentuckians moved to help struggling restaurant workers. Others were restaurant workers themselves, swallowing their pride to ask for help buying necessities, paying the electric bill, and making Christmas special for their kids.

“We need to come together and try to help people through the holidays, because through no fault of their own, these people have lost their job twice in a year, or massive pay reduction, and that’s just not easy,” Eldridge said of the group.

Many Workers, Low Wages

According to the Brookings Institution, waiting tables is the eighth most common job in the United States, with more than 12 million Americans in the hospitality sector. (This figure includes hotel workers and back-of-house workers, like dishwashers, in restaurants.) Restaurant work ranks among the top 10 industries with the most workers in the Ohio Valley states of Kentucky, Ohio and West Virginia.

The industry has been hit particularly hard by the pandemic, with establishments forced to close for long periods and struggling to survive on reduced capacity even when they’re permitted to open their doors. It’s left servers like Carey with their heads spinning as they balance newly unreliable incomes with kids’ changing school schedules and concern for their health and their families’.

On top of that, the unemployment insurance system is uniquely ill-suited to meet the needs of people in the restaurant industry, according to the Brookings Institution Metropolitan Policy Program fellow Annelies Goger.

“In every state, you have to have income at a certain level every quarter in order to qualify [for unemployment], and many tipped workers, because that minimum wage is so low, wouldn’t be able to document that they have enough income to show that they’re eligible,” Goger said.

In addition to making too little money to qualify for unemployment in the usual system, the tipped minimum wage also hurts millions of servers. The national minimum wage is $7.25/hour, but the minimum wage for tipped workers is just $2.13 an hour. Since unemployment benefits are calculated as a percentage of wages, tipped workers who do qualify for unemployment insurance are likely to receive just a fraction of what other workers might bring in.

“They said I would get $199 every two weeks,” said Chuy’s server Carey. “I could make that much in one day in a good day shift. So that’s like one day, stretched over two weeks.”

The expiration of some federal support for displaced workers hit the Ohio Valley especially hard. A report from the U.S. Bureau of Economic Analysis shows personal income dropped last quarter by about 24% in Kentucky, and by about 30% in West Virginia — the sharpest declines in the country.

Kindness Amid “Dystopia”

Louisville server Sara Bell spent weeks unemployed, then suffered a knee injury that’s kept her off her feet even as Kentucky has reopened some dine-in capacity at its restaurants. With no paid time off, Bell turned to the brand-new Adopt a Server page for help.

“I felt a little weird asking for help, because I don’t have kids,” she said. But she does have cats: Jibby, Chewie and Duffy. “My main thing is that I want to keep them fed.”

Adopt a Server helped Sara Bell get treats for Jibby (left) and Chewie (right).

Bell was quickly “adopted,” the language used on the page when a non-server commits to fill at least some of a server’s needs. “This sweet angel, she sent me a 22-pound bag of cat food and a big thing of their treats. And then she sent me a $100 Visa gift card and a $25 Starbucks gift card, and she kind of told me, everyone deserves a little Christmas.”

Also in Louisville, exotic dancer Tabitha Rowan worried how she would be received if she posted to Adopt a Server. But, she reasoned, closed mouths don’t get fed. “Here I am, you know, am I going to feed my son this last pack of hot dogs, this last box of cereal, and I’m just not going to eat so he can?”

So she posted, “I don’t want to come on here and not be 100% honest so here is my truth. I am not a server, I am a dancer.” She went on, “I was genuinely worried to make this post because of the “stereotype” that surrounds us. However, I promise that that stereotype does NOT apply to us all. I am just a mother that works VERY hard to take care of her son.”

She added a link to an Amazon wish list with Christmas presents for her three-year-old son, Legend.

In Lexington, Eldridge saw Rowan’s post, and she approved it. “She was just precious to me, for no other reason than she was just completely honest about her plight.”

Rowan was adopted the next day. “I opened up the door one day, and there were like six boxes sitting there.”

She went on, “I like the name Adopt a Server, but that group needs to be Beyond Blessings, is what it needs to be. That group is amazing.”

Tabitha Rowan asked for help with Christmas presents for her son Legend.

It’s hard to tell how many restaurant workers Adopt a Server has helped, but the page is brimming with multiple new posts each day. Scrolling through them is a rollercoaster of emotions: heartfelt photos of happy babies in brand-new clothes, interspersed with desperate pleas for help keeping the heat on.

Bell appreciates what the group has given her, but she sees a dark side to it, too. “This pandemic has really radicalized me,” she said. “As great as it is that people are so generous wanting to help others, it’s also incredibly dystopian the way our government failed the working class.”

An Unexpected Gift

Shortly after Jessica Carey sent Sarci Eldridge her son’s wish list, 11-year-old Dain came rushing to his mom’s side with a last-minute item for his Christmas list.

“There was a little bottle of cologne that he just loves, and he loves it because it is one that his dad gave him. And his dad died three years ago. He’s been stretching that cologne impossibly, and it finally ran out not too long ago,” she said. “He’s not very talkative about his dad. But that was one thing that meant a lot to him.”

The last few years have been difficult for Carey, she said, dealing with the loss of her high-school sweetheart and raising her son alone. It turns out, Adopt a Server had one more gift for Carey herself that wasn’t on any list.

“Me being me, I never thought that I was anything special. And I know that sounds bad to say about yourself, but … the fact that somebody thought that that was enough to want to help other people, like, I never realized that that is what I meant to them. And it feels really good.”

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