Research finds minority-owned businesses were disproportionately affected by lockdowns

A lot of damage has been done in the name of stopping the spread of COVID-19. Businesses have been forced to close with no hopes of reopening, and many others have lost so much potential revenue and customers that they are bound to be set back for a long time.

Proponents of COVID-19 restrictions have always been arguing that this economic damage was necessary in order to stop the virus. But with current reopening efforts showing no substantial effect on COVID-19 cases or deaths, one important question that will have to be answered is whether lockdowns were worth the cost.

Were lockdowns worth the cost?

It would certainly be a long time before we can tally up the total damage caused by lockdowns — that is if that task is at all possible. But numerous research coming out is already giving us a picture of how much damage the economy has racked up.

A good example is a recent NBER working paper showing how the lockdowns have caused a significant decline in business ownership. According to the paper, 

The number of active business owners in the United States plummeted by 3.3 million or 22 percent over the crucial two-month window from February to April 2020. The drop in business owners was the largest on record, and losses were felt across nearly all industries and even for incorporated businesses.

Even worse still, these losses are being disproportionately felt by minority groups. 

 African-American businesses were hit especially hard experiencing a 41 percent drop. Latinx business owners fell by 32 percent, and Asian business owners dropped by 26 percent. Simulations indicate that industry compositions partly placed these groups at a higher risk of losses. Immigrant business owners experienced substantial losses of 36 percent. Female-owned businesses were also disproportionately hit by 25 percent. These findings of early-stage losses to small businesses have important policy implications and may portend longer-term ramifications for job losses and economic inequality.

Group Percentage change Number of Owners in April Decline
Black -41% 637,769 -441,347
Immigrant -36% 2,009,597 -1,110,667
Latinx -32% 1,412,925 -657,971
Asian -26% 657,896 -230,632
White -27% 8,761,531 1,791,884

The loss of businesses has far-reaching implications for the whole economy. But the disproportionate impact on minorities is also bound to have a long-term impact on issues like economic mobility and income inequality as minority groups tend to have lower incomes, to begin with. As the author of the research Robert Fairlie explains, 

“The negative early-stage impacts on minority- and immigrant-owned businesses, if prolonged, may be problematic for broader racial inequality because of the importance of minority businesses for local job creation, economic advancement, and longer-term wealth inequality.”