Research finds minority-owned businesses were disproportionately affected by lockdowns

As states are reopening, and are not facing a substantial “surge” in Covid-19 cases, nor deaths, we are now forced to review the damage that the lockdown has caused on so many people’s livelihoods. Businesses have been forced to close with no hopes of reopening, many others have lost so much potential revenue and customers that they are bound to be set back for a long time.

As of current, little research exists, illustrating the total damage caused by the lockdown. But a recent NBER working paper, has proven what we knew all along; the lockdown has caused a significant decline in business ownership.

This paper provides the first analysis of impacts of the pandemic on the number of active small businesses in the United States using nationally representative data from the April 2020 CPS – the first month fully capturing early effects from the pandemic.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.

Worse still, these losses are being disproportionately felt by the minority groups, most of whose businesses were deemed non-essential and forced to close.

 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

This is bound to have a long-term impact on groups affected, as expressed by the author of the research, Robert Fairlie

“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.”