{"id":104,"date":"2021-05-26T19:49:00","date_gmt":"2021-05-26T23:49:00","guid":{"rendered":"http:\/\/blogs.dalton.org\/thebottomline\/?p=104"},"modified":"2021-10-29T19:50:10","modified_gmt":"2021-10-29T23:50:10","slug":"seeing-beyond-conglomerates-in-the-covid-19-pandemic","status":"publish","type":"post","link":"https:\/\/blogs.dalton.org\/thebottomline\/2021\/05\/26\/seeing-beyond-conglomerates-in-the-covid-19-pandemic\/","title":{"rendered":"Seeing Beyond Conglomerates in the Covid-19 Pandemic"},"content":{"rendered":"\n

Impact on Business owners:<\/strong><\/p>\n\n\n\n

Throughout the duration of the Covid-19 pandemic, businesses around the country have been ravaged and all sectors of the economy have felt the detrimental effects. However, no sector has been as disproportionately attacked as small businesses. As small businesses constitute 99 percent of U.S. businesses and employ about 60 million people, it is no wonder that they are so crucial to the U.S. economy, but it is these businesses that are the most vulnerable to the economic impacts of Covid-19.<\/p>\n\n\n\n

According to data from a study conducted by Alexander W. Bartick et al., <\/strong>43% of businesses surveyed had temporarily closed. Their closures due largely to reductions in demand and growing employee health concerns in response to the pandemic. Additionally, at the time of the survey, active businesses had dropped 39% from January 2020. Impacts vary across industries, with retail, arts and entertainment, personal services, food services, and hospitality businesses all reporting employment declines exceeding 50%. An average-sized firm with monthly expenses over $10,000 had only enough cash on hand to last roughly 2 weeks before going under.<\/p>\n\n\n\n

Another major reason for the massive amount of small business closures around the country is business owners\u2019 inability to pay ongoing expenses; they cannot survive the shutdown. The impact on small businesses around the world is predicted to be severe. Around 1.4 million to 2.1 million small businesses (25 to 36 percent) could close permanently as a result of the disruption from just the first four months of the COVID-19 pandemic.<\/p>\n\n\n\n

  Not only did the pandemic create forced closures and unemployment, as Annie Pilon corroborates, it also forced businesses to operate at a net loss with only 34 percent of small business owners reporting profitable operations. A significant decrease from the 55 percent who said that they were profitable at that same point a year prior. Businesses related to travel, arts, and culture suffered the biggest losses last year, but construction firms, restaurants, professional services, health services, and retail also struggled. Small businesses in sectors that are both most affected by COVID-19 and also the least financially resilient (such as accommodations and food services; educational services; and arts, entertainment, and recreation) employ about 20 million workers and earn 12 percent of US business revenue.<\/p>\n\n\n\n

Another factor contributing to the extent of this impact is the duration of the pandemic and how long businesses had to stay closed in order to maintain safety. Some businesses have estimated that closures alone might sum to 32.7 million job losses if the crisis lasted for 4 more months and 35.1 million job losses if the crisis lasted for 6 more months. And, while some of these workers will find new jobs, projections suggest that the scale of job dislocation could be larger than anything America has experienced since the Great Depression and larger than the impact of the 1918 influenza epidemic. For comparison, from the start to the end of the Great Recession, the number of active business owners decreased by 730,000 (only a 5% reduction), whereas in the pandemic, the number of active business owners in the United States plunged from 15.0 million to 11.7 million over the crucial 2\u2010month window from February to April 2020.<\/p>\n\n\n\n

Minority business owners<\/strong><\/p>\n\n\n\n

Out of all small business owners, minority business owners have suffered the most; just 26.5% of Black business owners said that their businesses are currently profitable, down from 40% in 2019. Among Hispanic business owners, 29.2% said their businesses were profitable, down from 51.2% in 2019. Additionally, immigrant business owners experienced substantial losses in business activity with a decrease of 36%. Female business owners were also disproportionately affected, experiencing a 25% drop in business activity.<\/p>\n\n\n\n

Government aid such as Paycheck Protection Program (PPP) loans, Economic Injury Disaster Loans (EIDL), and economic aid from the CARES Act served as a lifeline for many businesses. The distribution of aid was not equal though, and white business owners were three times more likely to receive these funds than Black and Hispanic business owners. These business owners are also more likely to struggle with credit and securing investors than white business owners. Although inequalities in business ownership and access to resources existed before COVID, the pandemic has accentuated them to an even greater extent.<\/p>\n\n\n\n

Minority-owned businesses are particularly at risk because they tend to have lower resilience. Business owners who obtained a high-school degree or less are disproportionately at risk as well, since their businesses often depend on less economically stable sectors, particularly in construction and in services. According to Andre FDua, around 25 percent to 40 percent of small businesses with fewer than 20 employees could be vulnerable to closing permanently in the first four months of the COVID-19 crisis, compared with less than 5 percent of firms with 100 to 499 employees. Thus smaller minority-owned businesses are more likely to exit temporarily or even permanently comparatively.<\/p>\n\n\n\n

But it is not just the businesses depending on the customers. People residing in minority communities will feel significant economic effects without the small businesses, as Robert Fairlie explains, \u201cThe negative early\u2010stage impacts on minority and immigrant\u2010owned businesses, if prolonged, could be problematic for broader racial inequality because of the importance of small businesses for local job creation (disproportionately hiring other minorities), economic advancement, and longer\u2010term wealth inequality\u201d. As more minority-owned businesses exhibit disproportionate amounts of closures and furloughs, their corresponding communities will also feel the impacts of these deleterious economic effects resulting in the inability to purchase goods. The process is cyclical, and without support such as PPP, EIDL or funds from the CARES Act, there is no way to return the small businesses to success.<\/p>\n\n\n\n

  These widespread exits of small businesses could disrupt the larger firms that rely on them and have knock-on effects for employment by reducing overall spending in the economy. And, as small businesses still form the backbone of many communities, a prolonged recession could be extremely damaging to individuals living in smaller minority\/immigrant communities.<\/p>\n\n\n\n

Stimulus<\/strong><\/p>\n\n\n\n

A massive incorporation may rely on small businesses to remain in operation, but the distribution of the stimulus check did not reflect their dependence. At the start of the pandemic, the CARES Act allocated billions of dollars to the general salvation of industries such as airlines. The problem with this, however, is that small businesses could only feel the back end of the stimulus. In the Employee Retention Credit, businesses were eligible for a 50% tax credit or up to $10,000 per employee to comp for wages until the end of 2020. Though, businesses with fewer employees received fewer benefits with the additional challenge of no national networks to support storefronts with lower spending.<\/p>\n\n\n\n

Approaching the Fall and Winter, small businesses also approach the time where, in years past, consumers spend the most. But with the pandemic, spending patterns changed. A study by Harvard based upon statistics gathered from ADP, Earnin, and Homebase \u2014 all prominent databases for small businesses across the nation \u2014 found that spending towards small businesses in affluent neighborhoods had decreased dramatically.<\/p>\n\n\n\n

\"\"<\/figure>\n\n\n\n

Figure 1<\/sup><\/p>\n\n\n\n

In figure 1, the majority of New York City has faced extreme economic deficits. Comparing the population of NYC with smaller cities or even country towns, the impact of individual stimulus on small businesses would be even less prominent. Among wealthy neighborhoods, spending at small businesses declines by margins nearing 50%. With the virus, gathering more customers relies less upon simple marketing and more upon questions to health and safety. Since small businesses are less able to do contactless exchanges and wealthier Americans can afford the luxury of online food deliveries and working from home, businesses that fall into both categories go under fast. For Michele Boldrin, a Ph.D. economist, without the fiscal stimulus, the number of small businesses reaching bankruptcy would rise from 850,000 to the millions.<\/p>\n\n\n\n

In the final months of Trump\u2019s presidency, the proposal of a second stimulus hit Congress. However, the negotiations remained open for months, also corresponding with the approach of the holidays. Businesses both small and large were forced to choose blindly how much stock to purchase as their sales would be directly impacted by the kind of stimulus given, if any. By postponing the rollout of stimulus, the US government caused the economy to become stagnant. Stagnation appears better than depression upon first glance, however, the former leads to an ultimate recession reaching beyond economics. <\/p>\n\n\n\n

In a paper published by the International Monetary Fund, a recession entails, \u201closs of lifetime earnings, loss of human capital, worker discouragement, adverse health outcomes, and loss of social cohesion.\u201d As the United States fails to deliver a clear standing on the direction of the economy, small business owners continue to sacrifice beyond their monetary resources. The failure of small businesses shatters the backbone of the United States economy, and without more cash directly into the pockets of in-need individuals and businesses, larger businesses will start to feel the impact.<\/p>\n\n\n\n

By: Alyssa Fan and Jodany Fanord<\/sup><\/p>\n","protected":false},"excerpt":{"rendered":"

Impact on Business owners: Throughout the duration of the Covid-19 pandemic, businesses around the country have been ravaged and all sectors of the economy have felt the detrimental effects. However, no sector…<\/p>\n","protected":false},"author":4204,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[331117],"tags":[304801,331112,331114,331116],"ppma_author":[331123],"class_list":["post-104","post","type-post","status-publish","format-standard","hentry","category-the-bottom-line","tag-alyssa-fan","tag-feature-pieces","tag-informational-articles","tag-jodany-fanord"],"authors":[{"term_id":331123,"user_id":4204,"is_guest":0,"slug":"c22nm1-2","display_name":"EBITDAlton Team","avatar_url":"https:\/\/blogs.dalton.org\/thebottomline\/wp-content\/wphb-cache\/gravatar\/254\/25498de874dab1cc6a0eafb4e96927c1x96.jpg","1":"","2":"","3":"","4":"","5":"","6":"","7":""}],"_links":{"self":[{"href":"https:\/\/blogs.dalton.org\/thebottomline\/wp-json\/wp\/v2\/posts\/104","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/blogs.dalton.org\/thebottomline\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/blogs.dalton.org\/thebottomline\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/blogs.dalton.org\/thebottomline\/wp-json\/wp\/v2\/users\/4204"}],"replies":[{"embeddable":true,"href":"https:\/\/blogs.dalton.org\/thebottomline\/wp-json\/wp\/v2\/comments?post=104"}],"version-history":[{"count":0,"href":"https:\/\/blogs.dalton.org\/thebottomline\/wp-json\/wp\/v2\/posts\/104\/revisions"}],"wp:attachment":[{"href":"https:\/\/blogs.dalton.org\/thebottomline\/wp-json\/wp\/v2\/media?parent=104"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/blogs.dalton.org\/thebottomline\/wp-json\/wp\/v2\/categories?post=104"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/blogs.dalton.org\/thebottomline\/wp-json\/wp\/v2\/tags?post=104"},{"taxonomy":"author","embeddable":true,"href":"https:\/\/blogs.dalton.org\/thebottomline\/wp-json\/wp\/v2\/ppma_author?post=104"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}