The impact of COVID‐19 on small business owners: Evidence from the first 3 months after widespread social‐distancing restrictions

This journal article by Fairlie (2020) analyses the impact of COVID-19 on small business owners in the United States, using data from the April 2020 Current Population Survey. It showed that the number of active business owners in the United States dramatically declined (-22%) between February and April 2020. The decline was sector wide and the largest on record.

Date added 2 October 2020
Last updated 2 October 2020

This journal article by Fairlie (2020) analyses the impact of COVID-19 on small business owners in the United States, using data from the April 2020 Current Population Survey. The survey was nationally representative of the US population and was based on observations for over 130,000 people. It showed that the number of active business owners in the US dramatically declined (-22%) between the lockdown months of February and April 2020. The decline was sector wide and the largest on record. However, the key finding of the study identified alarming patterns across gender, race, and immigrant status.

African American businesses were hit particularly hard and experienced a 41% decline in business activity. This was followed by a 32% drop in activity for Latinx business owners and Asian business owner activity fell 26%. Additionally, female and immigrant owned businesses both fell 25% in activity. This is cause for concern as there are fewer female business owners than males, and if forced to permanently close, there will be even less businesses owned by women, thus increasing gender inequalities. As minority and immigrant owned businesses also experienced large declines, it could fuel broader racial inequalities because of the importance of small businesses for local job creation as well as economic advancement. Collectively, this shows that COVID-19 has had a disproportioned effect on demographic groups of the US population and that some are at higher risk of business activity losses than others. Many minority business owners are lacking the necessary resources to endure longer closures and if businesses owned by these demographic groups do not recover fully it could have longer-term consequences on wealth inequalities.