A Disproportionate Number of Black Business Owners Are Out of Work Amid the Pandemic

At this point in the game, we know that COVID-19 has had a disproportionate effect on black people in terms of infection rates and death. Now, news of the economic impact of the virus on black businesses is raising concerns that the damage will be felt long after the pandemic passes.

The Washington Post reports that the number of black business owners currently working has fallen 40 percent, a far steeper decline than any other racial group. The economic shutdown that occurred in response to the pandemic resulted in the total number of active business owners dropping 22 percent overall.

“We already have disparities. African Americans have the lowest business-ownership rate in the population. … And so here we’re creating a situation of closures that’s hitting the groups with the lowest rates even harder,” Robert Fairlie, an economics professor at the University of California at Santa Cruz told the Washington Post.

Fairlie found that 450,000 black business owners are out of work since the pandemic began. One of the core reasons behind the decline is that black-owned businesses tend to occupy sectors most hit by the shutdowns. Beauty salons, daycare centers and taxi services make up a large portion of black-owned businesses and these are all sectors that have either had to shut down completely or operate at a highly reduced capacity because of coronavirus restrictions.

Another factor contributing to this loss is the lack of financial relief from the Paycheck Protection Program, which was designed to provide relief for businesses struggling during the shutdown and has come under fire for providing assistance to big business and publicly traded companies.

From The Washington Post:

The Center for Responsible Lending, a nonprofit research and policy group, sounded alarms in April about the Paycheck Protection Program, estimating 95 percent of black-owned businesses and 91 percent of Latino-owned businesses were tiny companies with slim chances of receiving a loan in the initial round. Most of those companies are the owner’s primary source of income, according to its report.

The Treasury Department has said it is working with the Small Business Administration to prioritize minority-owned businesses and the community financial institutions that often support them, while some state and local governments and philanthropists have created programs targeted at these groups. But many still see gaps.

“God forbid there’s another round of stimulus and we’re still doing the same thing,” said Eda Henries, the chief financial officer of a soul-food company who has organized fellow black professionals to help small businesses navigate aid programs during the pandemic.

Any assistance eventually provided by the government will inevitably be short term. One of the biggest questions remaining is not just how these businesses are going to recover—if they will at all. Heidi Shierholz, policy director at the Economic Policy Institute, told The Washington Post: “All recessions exacerbate existing inequalities by race and ethnicity — and always hit black and Hispanic workers harder — but this one will be worse. It will be an absolute nightmare.”