This news may surprise policymakers, but it is not for us. It appears that COVID-19 hit small businesses hard. The most affected were business owners, who had to deal with natural disasters such as floods or wildfires in addition to social isolation and lockdown orders. The worst offenders were small and medium-sized business (SMBs), which are owned by veterans, minorities and women. They simply didn’t have enough resources to deal with slowdowns or (especially) forced closings. Although some business problems in the past 2 years weren’t caused by political decisions it is fair to state that pandemics policy was more harmful than hurricanes for most of the most vulnerable entrepreneurs.
NIST reports that a study by NIST and NOAA found that pandemics dealt businesses owned by veterans and minorities a worse deal than those run by other business owners. Announced last week. The team also found that HUGO businesses experienced worse downturns due to COVID-19 than non-HUGO business that was hit by natural disasters.
They are Publication in paperThe International Journal of Disaster Risk ReductionWhile they are eye-opening and informative, the findings of these researchers also have a common sense quality. Tough times and restricted policies will hit people already in financial trouble more.
Researchers write that “pre-pandemic there were 30.7million small businesses in the U.S. which accounted 99.9% all U.S. businesses; approximately 18.3% were owned minority and around 19.9% by women, for reference year 2018”. The number of SMBs that are active has dropped since the COVID-19 epidemic. This was due to disproportionately impacting minority- and women-owned businesses.
Why should businesses that are owned by veterans, minorities and women be hit so hard during the pandemic? Their resources are smaller than those of other companies, making them more vulnerable to downturns and limiting their access to capital. Black-owned businesses tend to be more owner-operated and home-based than those owned by whites. They also have fewer employees. These businesses also tend to depend on personal or family savings for funding. Veteran-owned businesses have similar challenges borrowing money, and also run up against “difficulty with the transition from military to civilian life via loss of connection with the military community and loss of sense of purpose/camaraderie.”
Another source confirms the challenges faced by minority entrepreneurs. According to a report, minority-owned companies across the country face obstacles in accessing capital, markets, and social networks. These are all essential to any company’s growth. 2010. PaperThe U.S. Department of Commerce’s Minority Business Development Agency.
It’s difficult to raise capital, which makes it more difficult to expand a company. However, it means there is less money to cover for natural disasters or economic crises caused by pandemics. So, it is up to the entrepreneurs who are in distress to find help. The NIST researchers and NOAA researchers pointed out that historically there have been few avenues for SMB owners to fund disaster recovery, particularly for HUGO SMBs. This left small minority-owned businesses without much recourse.
Payam Aminpour (a postdoctoral researcher at NIST) commented that the study was based on self-reports. He is also a co-author.
Interestingly, the unintentional designation of businesses during the pandemic as essential and thus immune from lockdown orders caused a severe impact on local communities. This is something that many politicians have claimed to be very concerned about. Research found it less likely that sampled HUGO SMBs will be classified as providing essential services in the event of a pandemic.
When customers are virus-averse, it was enough for businesses to be difficultYou choseLimit your visits to restaurants, stores and hair salons. However, forced closures significantly worsened this problem. However, forced closures significantly worsened the problem. “Local enforcement and implementation of lockdown restrictions as well as voluntary behavioral responses to perceived COVID-19 spreading both played a part,” said economists Robert Fairlie (California-focused) Frank Fossen. Paper published last year by the National Bureau of Economic Research.
Politicians who said they were helping vulnerable communities by implementing restrictive policies inflicted disproportionate harm on them. It’s not the first instance of interventions in the economic system having a particularly harsh effect on certain populations. Occupation licensing laws, falsely promoted as consumer protections, create obstacles to trade and business entry for those who wish to start their own businesses. Logistically, these barriers prove to be most difficult for those with less capital and the ability to navigate regulatory mazes.
According to Stephen Slivinski, economist at the 2015 Goldwater Institute: “The lower the rate for licensure in low-income occupations the higher the rate that low-income entrepreneurs can start a business.” StudyThis was later cited by White House. Slivinski identified particular negative effects on immigrant attempts to establish themselves in the United States. However, anyone with limited resources could be hindered by obstacles.
This study on the impact of COVID-19 upon small business owners is the same lesson we can learn from all disruptions to society, even if it’s intentional. This means that those who are most affected will be those with the lowest resources and least ability to defend their rights. Politians who say they care about vulnerable people should remember that these are those most at risk from the restrictions and dictates they place.