First published August 2020
The COVID-19 pandemic has exposed acute and deep-rooted connections between physical and economic health. Many of the same places hit hardest by the pandemic are reeling concurrently from the health crisis, business closures, and job losses. These communities are disproportionately communities of color.
The effects of the pandemic on small businesses amid forced closings, modified re-openings, and weakened demand, are well documented. Nationally representative data on small businesses indicate that the number of active business owners fell by 22 percent from February to April 2020 —the largest drop on record. While the overall decline is noteworthy, differences among closure rates across racial and ethnic groups are even more striking. Black businesses experienced the most acute decline, with a 41 percent drop. Latinx business owners fell by 32 percent and Asian business owners dropped by 26 percent. In contrast, the number of white business owners fell by 17 percent.
This brief examines the reasons why Black firms have been almost twice as likely to shutter as small firms overall.