Minnesota’s Economic News – W/E 4/16/21
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Small businesses make the majority of the American economy; they employ close to 50% of the labor force and make up the majority of job growth numbers. But small businesses are more fragile and susceptible to economic downturns. Small businesses operate on razor margins; the corona virus has revealed how thin. Service industries like restaurants and other small businesses are already laying off workers and closing for business. Most of them cannot foresee themselves riding out the effects of the corona virus if it persists for much longer.
Many small businesses are already not insulated to economic hits — only 50% last more than five years, according to the federal government’s Small Business Administration, and a steep reduction in business could prove devastating.
The pandemic has of course proven harmful for big businesses and individuals. But smaller businesses do face a lower chance of weathering it, considering most of them are service jobs and are labor intensive. What we can learn from this is the fact that small businesses are at the forefront of the economy . They feel every change much stronger, and so do their employees as well as customers.
So state policy makers should keep this fact in mind when formulating business policy. Policies like minimum wage, paid leave, occupational licensing affect small businesses because their costs rise by a bigger margin. Big businesses for the most part can absorb costs that come with regulation. It is the small businesses that have to be used as a benchmark when studying impact of policy.