By Harrison Ackerman
This post is part of an Interise Insights series, sharing findings from our most recent 2021 Annual Assessment survey with 1,164 responses from established small businesses across race, ethnicity, and place. All graduates of Interise’s flagship StreetWise ‘MBA’ program from the past three years, their responses represent a unique firm-level dataset. These latest outcomes are from the 2020 business year, and reflect the first year of the COVID-19 pandemic and its multifaceted health, economic, and social effects.
Throughout the first year of the COVID-19 pandemic, business owners in Interise’s network faced unprecedented challenges around staffing yet seemed to demonstrate resilience. A 60% majority of respondents added to or maintained their employee count in 2020, a difference of only 3% from the prior year, likely due at least in part to the SBA’s Paycheck Protection Program (PPP) incentivizing small business owners to keep employees on payroll. While a greater share of respondents still added jobs than lost jobs, the gap shrunk year-over-year from 2019.
Those that lost jobs had more significant losses, as shown through the first ever network-wide job loss. In 2019, Interise businesses had a job creation rate of 6.3%, over four times higher than the national private sector as a whole. In 2020, the alumni job creation rate was -3.5% compared to -8% for the private sector. During this first year of the COVID-19 pandemic, Interise businesses collectively experienced job loss however to a lesser extent than the private sector as a whole.
The average size of respondent businesses in terms of Full-Time Equivalent (FTE) employee count was 13, and the median size was eight. White-owned businesses were larger by both measures than Black and Latinx-owned businesses. While 43% of both white and Black-owned businesses in middle- and upper-income (MUI) communities added jobs, both had zero net new jobs created per business. Comparatively, 53% of Black-owned businesses and 44% of white-owned businesses in low- and moderate-income (LMI) communities added jobs, with two net new jobs created and one job lost respectively on average per business. Women-owned businesses were smaller in terms of FTEs than those owned by men, and were more likely to add jobs, yet experienced an 8% job loss rate while men in the aggregate remained flat, neither adding nor losing jobs. Black-owned firms in LMI areas outpaced all other race and place segments on average jobs created per business, and women-owned businesses were set back in job loss more so than those owned by men.
Interise businesses hired an average of 62% of full-time staff from the local community, and a median of 75%, highlighting one of the many important roles small businesses can play in their communities as employers. Black businesses located in LMI communities had an average of 71% local staff, and a median of 92%, compared with 56% and 64% respectively for white businesses in LMI areas. Women-owned firms had an average of 64% local staff, and a median of 80%, compared with 61% and 67% respectively for men-owned businesses.
The hardest hit NAICS industry sector was Other Services, which includes service providers not accounted for elsewhere in the classification system, with a job loss of -19%. Administrative Support, Security, and Waste Management, along with Accomodation and Food services, both followed close behind with -12% job losses each. On the other side of the spectrum, Professional services businesses stood out with a 7% job creation rate. Other top industry sectors experienced smaller degrees of job loss or creation, and these observations are consistent with how the pandemic disproportionately disrupted certain industries more than others.
In terms of benefits employers offered employees, including health insurance, paid sick time, paid vacation time, formal training, paid holidays, dental insurance, and retirement or pension plans, rates remained stable with little change year-over-year from 2019 through 2020. By race, as shown in the table below, white-owned businesses offered all these benefits at significantly higher rates than their Black counterparts except for formal training opportunities. We see the same for LMI area businesses, lower rates of benefit offering than those in MUI areas for all categories except formal training. Latinx-owned businesses were less likely than white-owned businesses to offer health and dental insurance along with retirement savings options, but more likely to offer paid holidays, training opportunities, and paid sick time. Women-owned businesses were less likely than those owned by men to offer benefits in all categories. While these comparisons are influenced by other factors such as industry and business size, they illuminate opportunities for economic mobility through cultivating high quality jobs.
These findings across various demographic segments throughout such an uncertain year offer both testaments to capacity building as a tool to further a more inclusive economy, and new questions to explore about varying outcomes. We are eager to continue this analysis with the economic and community development fields to further our collective understanding.