The Small Business Recovery from COVID: Disparities by Race

• In Event: Minority and Immigrant Entrepreneurship

Abstract

Operation Warp Speed which was a public-private partnership led to the rapid discover of a COVID vaccine in the pandemic. Although the novel coronavirus (a.k.a. COVID-19) first hit the news in February 2020 the rollout of the vaccine started as early as December 2020. In response, there was a lot of optimism at the beginning of 2021 that COVID was behind us. Small businesses which were hit especially hard in the beginning of the pandemic were hoping for a return to normal. Of course, we now know that the vaccines turned out to be less effective than anticipated, there was resistance and refusal to take them by many people, COVID cases continued to surge off and on in 2021, and the economic recovery sputtered.

This paper focuses on what happened to small business activity and earnings in the uneven economic recovery from COVID, starting in 2021 and continuing through 2024. The question of whether there was a grand-scale reopening of small businesses or sluggish reopening in the economic recovery is explored. Was the recovery or lack of recovery felt disproportionately by race? In the first month of the pandemic, Black Americans experienced losses of 41 percent of active business owners whereas white Americans experienced losses of 17 percent. Latinx also experienced large losses at 32 percent of business activity, and Asian businesses experienced losses of 26 percent to business activity.

The key findings from this study which analyzes several years of Current Population Survey (CPS) microdata and COVID cases indicate that: (i) After an initial decline, COVID cases increased later in 2021 and only dropped to less than 100,000 new cases per week as late as Spring 2023. (ii) Total business activity improved in 2021 and continued the rebound through the end of 2024. (iii) Total business earnings rebounded after COVID but have not grown from pre-pandemic levels. (iv) The recovery from the pandemic was strong for business owners of color. There was some unevenness over time but all groups are above pre-pandemic levels which contrasts with no gains for white business owners. (iv) Business earnings rebounded for all racial groups and has grown since pre-pandemic levels for minority-owned businesses. White business earnings have not grown since pre-pandemic levels.

Author

• Robert W Fairlie, University of California - Los Angeles
  Presenting Author