The number of African American business owners working has fallen by 41% as COVID-19 social distancing restrictions and shifts in market demand take a toll on the economy, a new economic analysis suggests.
The impact on African American businesses has been greater than for any other group, according to Robert Fairlie, an economics professor at the University of California at Santa Cruz, who called the new findings “alarming.”
Fairlie’s working paper provides the first analysis of the pandemic’s impacts on small businesses in America, using nationally representative data over the crucial two-month window from February to April 2020.
The number of active business owners in the United States plummeted by 3.3 million or 22 %, he found.The drop in business owners was the largest on record, and losses were felt across nearly all industries and even for incorporated businesses.
The industry distribution of Black business owners, which determined whether they were categorized essential or non-essential businesses, placed them at a higher risk of losses due to COVID-19, he found. The percent change in Black business owners became considerably smaller when simulations were run using the national industry distribution. The change is from a loss of 41% to a loss of 35%.
Other groups also were hit hard. Latinx business owners fell by 32%, and Asian business owners dropped by 26%. Immigrant business owners experienced substantial losses of 36 %. The number of active female-owned businesses declined by 25%.
“The loss of 440,000 Black business owners representing 41% of the previous level is disconcerting” Fairlie wrote.“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.”