The success, growth, and culminated wealth of minority-owned businesses have experienced a sharp decrease as a result of state-mandated restrictions following the spread of COVID-19. Data shows that this decrease is largely disproportionate, for a number of reasons that nonminority-owned businesses are not as likely to encounter, leading to their ensuing higher rates of closures and diminishing cash balances.
André Dua, Deepa Mahajan, Ingrid Millán, and Shelly Stewart of McKinsey & Company author a research exploring the origins of the vulnerability of minority-owned businesses. In it they list their narrowed two: “they tend to face underlying issues that make it harder to run and scale successfully, and they are more likely to be concentrated in the industries most immediately affected by the pandemic.” These underlying issues include an existing financial fragility due to the restricted access to credit or loans from banks, leaving the prescribed label of minority-owned businesses to be “at risk” or “distressed”.
Exacerbated by current COVID-19 conditions, these businesses have had limited options, resorting to either layoffs or closures, both temporary and permanent, in order to stay afloat. Foot traffic in and out of open stores are low, as are sales and overall revenue. In a survey conducted by the Proceedings of the National Academy of Sciences to provide insight into the economic impacts of COVID-19, owners reported that the number of full-time employees had fallen by 32% between January and March and the number of part-time employees was 57% lower when compared to numbers at the end of January. They also purport unemployment numbers after the shutting down of businesses to be in the millions, displacing the finances of individuals and families who are in desperate need of financial security amidst the pandemic. According to a recent study by the Federal Reserve Bank of Cleveland, some owners have even reported using personal, out-of-pocket finances to sustain and extend the longevity of their businesses. And these effects are not just limited to a small number of owners but rather thousands who can do nothing but watch their means of livelihoods plummet in a downward spiral.
The implications of these effects are great. The Federal Reserve Bank of Cleveland purports that minority-owned firms “support almost 9 million jobs across the United States” alone. This outstanding number, when coupled with the myriad other industries supported by minority-owned businesses, reveals that they are not only necessary to the communities they aid through employment but the American economy at large. The continuing of these damaging effects is bound to have long-term impacts and employing well-intentioned policies to protect these businesses is a necessity.