In the US, those already vulnerable stand to be the most negatively impacted from COVID-19 related health and economic crises. This piece is the third of a three-part blog series focusing on disproportionate consequences of both COVID-19 and efforts to limit its spread for minority-owned and low-income-area small businesses. Equity needs to be at the forefront of economic relief and recovery efforts to ensure we are best positioned to further build an inclusive economy. Doing otherwise will only deepen our country’s racial health and wealth gaps.
Right now, many small business owners struggle to maintain faith in the cliché, What doesn’t kill you makes you stronger — or that crisis leads to opportunity. A US Chamber of Commerce guide for resiliency advises small business owners to “think of the new opportunities that a disaster can create.” A previously untapped population of customers might emerge. Otherwise unlikely cooperation could become possible. Previous pandemics have stimulated enormous innovation. Yet, no one can fault a business owner for failing to see COVID-19 through such a sunny lens. This optimistic perspective rings hollow for many.
Taking advantage of opportunities during this crisis proves to be difficult, especially for business owners of color and businesses operating in low-income areas. As a prerequisite to “choose to capitalize” on the crisis, a firm needs to stay in business and retain its talent.
A 2019 Federal Reserve survey for small businesses used several metrics to gauge respondents’ financial health. 58% of black-owned and 49% of Latinx-owned businesses were determined to be “at risk” or “distressed.” Businesses in these categories commonly reported they would lay off employees in a financial crisis, and they were far more likely to close or sell their business. Even if a crisis can be an engine for innovation, many entrepreneurs of color may not be able to maintain a sufficient level of operations to power shifts in business strategy.
Another commonly stated silver lining in response to the current crisis rides on COVID-19 social distancing practices — remote work actually has upsides, including higher productivity and lower organizational costs. Yet, according to the Bureau of Labor Statistics, only 19.7% of black and 16.2% of Latinx workers are able to work from home, compared with 29.9% of white workers. In terms of income, only 29.3% of workers with an income below the national median have this “remote work” option. These populations are forced into a dilemma between protecting their families’ health and continuing to provide for their families.
Many minority-owned businesses are also disadvantaged by relatively limited networks. A 2015 paper from Brookings reports that minority-owned businesses tend to rely significantly more on “investments of personal and family wealth,” as well as “advice and assistance from friends in their communities.” Interise’s research on Latinx-owned businesses finds that 12% of Latinx business owners rely on financing from personal friends, a much higher figure than that for non-Latinx business owners. Close friends and family provide most of the financial and advisory support for many minority business owners. While these relationships are certainly valuable, companies with more extensive and diverse networks have greater access to technical and financial support for surviving a crisis.
Despite additional hurdles facing minority-owned and low-income-area businesses, Interise data shows that these entrepreneurs have the potential to exceed the national average in revenue growth and job creation. The knowledge, know-how, and networks gained from programs like the Streetwise ‘MBA’™ will prove invaluable at a time like this. Interise explicitly focuses on supporting small businesses located in low-income areas and/or owned by people of color to create systems that are equitable for our most vulnerable populations.
We find too many instances in history of biased policies exacerbating disasters. Federal programs instituted to alleviate the Great Recession, for example, came with flawed rules for eligibility that disproportionately blocked black households from benefitting. Equally as dangerous as biased policies is the fact that their damage is easily hidden by using broad-stroke statistics. It is easy to report, for example, that the average standard of living in a city went up without also reporting that the standard of living in certain neighborhoods went down. Any steps toward recovery from COVID-19 must be designed so that those who were most vulnerable going into the crisis do not get swept under the rug.
Inequality complicates the “opportunity-from-crisis” narrative, but the current upheaval of COVID-19 does create an environment ripe for long-needed systemic change. We need policies that specifically and deliberately aim to assist minority business owners and businesses located in low-income communities. Only then can we say we take advantage of the opportunities of this crisis, in a fight for an inclusive economy in the post-pandemic world.