Covid-19 Impact Through a Social Justice Lens
Laura Marti – August 17 2021
Early in the pandemic, Black businesses were hit hardest by Covid-19. In a study published in May 2020 by Robert Fairlie from the University of California Santa Cruz, the number of Black business owners actively working fell 41% from February to April, in comparison with active white business owners who dropped much less at 17%.
Professor Fairlie told Fortune he was “shocked” at the findings. But Eugene Cornelius, senior director at the Milken Institute’s Center for Regional Economics and California Center and alum of the Small Business Administration, didn’t think anyone should be surprised. “What is amazing is everybody is asking why—we knew this,” he told Fortune. “The virus has pulled the sheet off of what has been going on in the Black community for years.”
A year later, Black businesses are still disproportionately struggling. A national poll conducted by Small Business Majority reveals the ongoing challenges Black and other minority small business owners face during the COVID-19 pandemic—over and above the ongoing systemic barriers they face to access financing and business resources. Small business owners report they’ve struggled to navigate new funding programs, like the Paycheck Protection Program (PPP). Of those who applied for a PPP loan last year, nearly 57% found it challenging to apply.
They also experienced operational obstacles to ensuring the health and safety of their customers and employees, such as obtaining a minimum of personal protective equipment (PPE), rearranging workspaces and retail floors to accommodate social distancing, and physical and technological needs for transitioning to remote work.
As Forbes noted from the study, Black and minority owned businesses are losing major revenue. As a result of sharp shortfalls, business owners are making difficult decisions just to survive.
Frankly, many business owners are in crisis:
- About 32% of minority-owned businesses have cut employee hours.
- Nearly 25% have temporarily closed their doors.
- 60% of those who reduced staff at the height of the downturn last year have not restored their headcount to pre-pandemic levels
- Nearly 25% of entrepreneurs of color—Black, Latino, Asian, and American Pacific Islander—may in the next few months lay off employees permanently, a significantly higher percentage compared to 14% of white small business owners.
- Despite their best efforts, 18% of Black and Latino business owners say they’re likely to permanently close their business, compared to 14% of white small business owners.
Other research is revealing the same pattern. A February 2021 report by Facebook and the Small Business Roundtable, which surveyed more than 35,000 small business leaders across 27 countries and territories showed that small businesses continue to close in large numbers. Women and minority owned businesses took the biggest hits. They also reported that almost 66% of Black-led businesses and 46% of Hispanic-led ones that reported a drop in sales said it was by over 50%.
An interactive report by McKinsey & Company Covid Response Center highlights disparities in US unemployment and the widening employment gap across gender groups, racial and ethnic groups and other demographics. It includes moving personal interviews with workers and helpful interactive graphics (see example below) that give a visual understanding of the disparities. You can check it out here.
So in such a challenging business environment, what are the options?
For one, the US Chamber of Commerce recently reported that small business owners are helping each other in inspiring ways. Entrepreneurs are collaborating with each other, locally, nationally, and online, to support each other and keep each other afloat. One encouraging example is the Black Innovation Alliance, which was launched by Kerry Bowie of Msaada Partners and Preston L. James of DivInc. Every organization in BIA is committed to lifting up the underappreciated and underfunded businesses led by people of color. To support fellow Black entrepreneurs and innovators, BIA has been showcasing the work of the individual leaders of its Innovator Support Organizations (ISOs) on social media and other media outlets. Check out the story here to read about more creative solutions.
Business owners are not only persistent but also creative. From virtual services to new products and processes, small businesses are digging deep to find alternatives that leverage opportunities to survive despite the pandemic. Expanding digitally was critical to how many businesses have stayed open throughout the pandemic. For some businesses, part of the pivot to online operations involved accepting cashless and contactless payment options for the first time.
Other important strategies small business owners (SBOs) implemented this year include:
- Adding work-from-home capabilities to reduce the risk of spreading COVID-19 in the workplace (28%).
- Reducing operating hours (27%) and staff (20%), either temporarily or permanently, to cut costs during periods of closure or lower revenue.
- Investing in additional cleaning services to better meet the health and safety expectations of employees and consumers (18%).
In this special report by Financial Times, many Black entrepreneurs, especially women, say their biggest challenge is still access to credit. Some are reaching into their personal networks for help where funds are needed to sustain operations during the pandemic, especially when they can’t rely on PPP loans. Dawn Kelly, owner of juice bar The Nourish Spot in NYC, is one example. She was able to tie into the NYC “ecosystem of other entrepreneurs and ancillary organizations that help.” “We have those ties and that is what is going to help me weather this pandemic,” she said.
Melinda Sylvester is an example of someone who has changed their business model entirely, pivoting her publishing firm to focus on marketing work. She also leads the greater Georgia chapter of the Black Chamber of Commerce, and said many new members have started businesses that operate entirely online. The Chamber has also organized virtual training sessions and collaborated with local lawmakers on a dedicated grant program.
So while the pandemic has especially affected Black and minority owned businesses in an unprecedented way, we want to affirm and celebrate their continual creativity, innovation and ability to lean into, embrace and adapt to change—not just to survive, but to thrive!
Check out these resources below to learn more.
- Why Black-owned businesses were hit the hardest by the pandemic — Fortune (June 2020)
- The Impact of Covid-19 on Small Business Owners: Evidence of EarlyStage Losses from the April 2020 Current Population Survey — Stanford Institute for Economic Policy Research (May 2020)
- As Small Businesses Continue to Struggle Globally, Women and Minority-Led Ones Are Hardest Hit — Facebook Report (April 2021)
- 2021 Global State of Small Business Report — Facebook (April 2021)
- Women and minority-owned small businesses aren’t sharing in the U.S. recovery — Fortune Magazine (April 2021)
- To the Rescue! How Small Businesses Are Helping Each Other Survive During COVID-19 — US Chamber of Commerce (2021)
- Small Business Owners Of Color Continue To Face Challenges — Forbes (Jan 2021)
- Small businesses continue to face closures in 2021 — Small Business Majority
- An unequal recovery: Disparities in US unemployment | COVID Response Center — McKinsey & Company
- 5 Small Business Owners Talk Pandemic-Inspired Changes That Are Here to Stay — US Chamber of Commerce
- Adapting and Surviving: What’s Next for Small Businesses — US Chamber of Commerce
- Black women entrepreneurs fight to stay afloat in the pandemic — Financial Times (March 2021)