COVID-19: Fallout for Black-Owned Businesses

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U.S. policymakers must recognize the value of Black-owned businesses for local communities and the economy as a whole in order to provide “true relief” for those businesses during the COVID-19 pandemic, according to researchers in the Brookings Institution’s Metropolitan Policy Program.

The researchers, Andre M. Perry, Ph.D., and David Harshbarger, suggest the allocation of just $10 million to the Minority Business Development Agency (MBDA) out of the $2.2 trillion economic relief bill does not reflect the critical role of Black- and other minority-owned businesses in providing goods, services and jobs, and their unique vulnerability as the pandemic triggered by the coronavirus ravages minority communities. A Washington Post analysis of available data and census demographics shows that majority-Black counties have three times the rate of infections and almost six times the rate of deaths as counties where white residents are in the majority.

The situation may be even more dire for Black businesses as the federal Paycheck Protection Program that provides loans to small businesses ran out of money on April 16, just shy of three weeks since it was implemented and more than a month before it was scheduled to end. Operated by the U.S. Small Business Administration (SBA), the program was scheduled to end on June 30.

“Black-owned businesses are highly engaged on the frontlines of the COVID-19 crisis…Some of the top industries for Black-owned businesses, by number of firms, include occupations that are directly combating the virus or are most impacted by the country’s social distancing measures,” Perry and Harshbarger state in a joint post on the Metropolitan Policy Program blog.

The post, titled “Coronavirus Economic Relief Cannot Neglect Black-Owned Business,” cites U.S. Census data showing 29 percent of all Black-owned businesses with paid employees are in health care and social assistance professions, including independent practices of physicians, continuing care/assisted living, and youth services; 10 percent are in administrative, support, waste management, and remediation services, which includes call centers, temp agencies, collection bureaus, and recycling and waste management facilities; and 8 percent in retail trade, which includes everything from grocery stores to home furnishings to gasoline, but not restaurants.

Not only does the nature of these businesses place them in the center of the fight against COVID-19, it also places them at the center of the pandemic’s economic fallout, Perry and Harshbarger contend. The fact that the median white family has roughly 10 times the amount of wealth as the median Black family, means Black business owners generally have less cushion to deal with economic shocks, they say.

Even when the economy is booming, Black-owned businesses suffer from historic and persistent underinvestment, the researchers argue. For example, data from the Stanford Institute for Economic Policy Research show that before the COVID-19 pandemic, only 1 percent of Black business owners obtained loans in their founding year, compared to 7 percent of white business owners.

And while Black- and other minority-owned businesses generally earn significantly higher ratings on Yelp than white-owned firms, according to a study by Brookings and the Gallup organization, businesses in Black-majority neighborhoods receive less revenue than businesses in white-majority neighborhoods, largely because of consumers’ negative perceptions of Black neighborhoods. Last year, these racial attitudes cost businesses in Black-majority neighborhoods $4 billion in revenue.

“These are examples of targeted, long-term commitments to minority-owned businesses that could extend throughout the recovery from the coronavirus recession. Funding for these and other agencies to assist Black-owned businesses in procuring federal grants in health care and infrastructure sectors would better allow Black-owned businesses to survive the COVID-19 pandemic, and aid in the nation’s economic revival,” Perry and Harshbarger conclude.