Economy

Black Businesses Decimated by Lockdowns, Riots

Few were unscathed, but minority-owned businesses might really have been hardest hit.

Louis DeBroux · Jun. 17, 2020

Precious few Americans escaped the Wuhan coronavirus pandemic unscathed, but for many minority-owned small businesses, the combination of draconian lockdown measures and the recent riots following the unjust death of George Floyd have proven too great an obstacle to overcome.

According to data recently provided by the National Bureau of Economic Research (NBER), between February and April of this year, the number of working business owners plunged from 15 million to 11.7 million, a collapse of 3.3 million, or 22%.

To put the magnitude of that drop in context, Robert Fairlie, an economist at UC-Santa Cruz, explains: “No other one-, two- or even 12-month window of time has ever shown such a large change in business activity. For comparison, from the start to end of the Great Recession the number of business owners decreased by 730,000 representing only a 5 percent reduction.” Based on the number of small businesses remaining in operation, he says the lockdown resulted in “the equivalent, in only weeks, of four Great Recessions.”

Fairlie goes on to note, “No group was immune to negative impacts of social distancing policy mandates and demand shifts,” but the data shows black and Hispanic small-business owners were hit hardest, with 441,000 black business owners, or 41%, no longer actively working. Latino businesses fell by 658,000, or 32%.

This is a direct result of the COVID-19 lockdown measures that forced businesses to temporarily close and customers to shelter at home, resulting in a forced partial shutdown of the economy. Small businesses are especially vulnerable to such measures because, unlike major corporations, they generally don’t have substantial cash reserves. Nor are lenders likely to extend credit to small businesses facing lockdown restrictions and a struggling economy with no certainty of being able to repay loans.

The industries that were particularly hurt by the lockdowns include construction (27%), repair and maintenance (25%), transportation (22%), and restaurants (22%).

This is devastating and heartbreaking in several aspects.

It’s painful to see these minority-owned businesses go under when, just months ago, the economic policies of President Donald Trump had resulted in all-time low unemployment for blacks and Hispanics. That included a new wave of investment in low-income, predominantly minority communities driven by the Republicans’ 2017 Tax Cuts and Jobs Act, which created tax-preferred “Opportunity Zones,” leading directly to the creation of new small businesses by minority entrepreneurs.

The lockdowns deprived these small-business owners of desperately needed revenue, and in many Democrat-run states, governors and mayors employed particularly harsh measures, such as threatening shelter-at-home violators with jail time and arresting business owners who opened up in defiance of the orders. These blue-state governors and mayors also kept their states shut down far longer than other states, further damaging their economies.

As a result, by the time state and local economies began to slowly reopen, these businesses no longer had the revenue or savings available to continue operations and were forced to close their doors.

Even more painful to see were those businesses that survived the Wuhan Virus lockdowns only to fall victim to widespread looting and rioting following the death of George Floyd. Sadly, it was minority-owned small businesses that suffered most.

To make things even worse, following Floyd’s death and the subsequent riots, many Democrat governors, mayors, and city councils are beginning to buckle to the radical Left’s demands to “defund the police.” Minority business owners struggle with that question. On the one hand, it’s clear significant reforms are needed in policing standards, especially regarding the firing and/or prosecution of bad cops who violate civil rights. On the other hand, reducing or eliminating police presence will only result in increased crime and more closures of primarily minority-owned businesses.

Running a successful small business is a challenge in the best of times. Some 20% of small businesses fail in their first year, 30% in their second year, and 50% fail after five years. Only 30% of small businesses will make it past their 10-year anniversary.

But to ask small-businesses owners to not only survive the inevitable challenges of opening and growing a business but remain operational after government-mandated shutdowns and mobs of rioters and looters choke them is just cruel.

We owe it to every small-business owner, and their employees, to reopen the economy and enforce the Rule of Law to protect what they have spent their lives building up. They deserve no less.

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