Reports Addressing COVID-19 Impact on Small Businesses and Economic Recovery
This page provides links to key reports related to small business and the COVID-19 pandemic. It is not an exhaustive list, rather it is intended to support further examination and discovery on this important topic.
Analysis of Place-Based Incentives: Brookings Institute issued a report, How States Can Direct Economic Development to Places and People in Need, which “finds that the criteria that governments use to geographically target tax incentives and other place-based programs are often ill-conceived or out-of-date, with the result that initiatives end up serving wealthy locations instead of disadvantaged ones. And even when programs do reach the intended communities, they often are not well-suited to help residents.” Report recommendations include:
Targeting programs using quantitative measures
Systematically assessing geographic targeting
Regularly updating the set of eligible locations
Tailoring economic development strategies to local needs
Creating job opportunities for low-income residents
California Small Businesses Face Difficult Decisions: Small Business Majority released the results of a California survey in December 2020, California Small Businesses Face Difficult Decisions As Pandemic Continues And Funding Freezes.” The survey of 418 California small business owners (nearly evenly split between white entrepreneurs and business owners of color) taken between November 10 and 23, 2020. found:
17% of entrepreneurs of color report they are likely to permanently close their business in the next three months, compared to 12% of white business owners.
Nearly half say operating capacity has decreased, with 16% reporting their capacity has decreased by more than 50%.
Despite efforts to reopen local economies and “get back to normal,” small business owners have had to reduce the number of employees during the height of the pandemic, with more than 60% reporting that they have not restored their headcount to pre-pandemic levels.
While about half of small businesses say they applied for PPP loans. Of those who didn’t apply, they largely attributed their reasons to confusion about how to apply, fear over taking on debt, inability to secure a loan through their bank or thinking they were ineligible.
28% of entrepreneurs of color report they may be forced to temporarily close their business in the next three months. Of those, 27% say they may lay off employees permanently, compared to 15% of white entrepreneurs.
More than 80% of small business owners support providing direct grant assistance to small businesses, and 76% support another round of PPP loan dispersal.
For firms that are still operating, cash balances are a growing concern, with minority-owned firms experiencing a more severe cash crunch than nonminority-owned firms.
Minority-owned firms had less financial reserves and lower average revenues prior to the severe economic downturn.
Business sectors with high percentages of minority-owned firms were the same industry sectors most impacted during the COVID-19 recession.
Data suggests that minority-owned firms had difficulty in access the federal Paycheck Protection Program, which may have been related to the lack of banking relationships prior to the pandemic.
The potential loss of minority-owned firms goes beyond the business and its workers and could have negative consequences to the broader US economy.
Economic Impact of COVID-19 on California Latinos: The California Latino Economic Institute released a new policy brief that provides new data on the disparate and growing negative impact of COVID-19 on Latinos in California. The briefing was conducted in partnership with Mindy Romero of the Center for Inclusive Democracy (CID) at the USC Price School of Public Policy. The announcement identified the following findings from the briefing:
Latinos are overrepresented among California’s COVID-19 cases and deaths—59% of cases and 49% of the state’s deaths.
Latino overrepresentation in California’s cases has increased since April 2020.
Nearly 12% of California Latinos are currently uninsured—double the rate of other groups.
Latino unemployment rates are double those from the same time last year.
Nearly two-thirds of California Latinos report experiencing a loss of employment income since March 2020.
Over 40% of Latinos currently report that it is somewhat or very difficult to pay their usual household expenses in the last 7 days.
Over three-quarters of California small business owners report that COVID-19 has had a moderate to large effect on their businesses.
Economic Status of Small Business: The US Office of Small Business Advocacy released an Economic Bulletin on the status of small businesses during the pandemic. A few highlights include:
While there was little change in the total number of self-employed persons, their income declined 13% annualized in the second quarter of 2020. According to the report, this is the largest quarterly decline since quarterly data began to be tracked in 1947. Incomes, at the aggregate-level, are reported to have recovered in the third quarter.
Net new job growth was strongest among small firms (<500 employees) from 2010 to 2019, accounting for 63% of the private net job creation. These small firms’ employee about 50% of all workers. In 2020, small businesses continued play to play an important role within communities having a net job loss of 4.8 million vs 5.3 million for large firms.
While business openings have been relatively stable for fifteen years, the number of new business applications have spiked in 2020. The specific source of this increase (new or reformation of existing business) is unclear, and the next few months will provide greater clarity.
Economic Mobility for All Californians: The California EDGE Coalition has released its policy agenda for 2021. In summary, their policy agenda includes the following:
Support funding for education and workforce training programs to create pathways to quality jobs by integrating competency-based education and credit for prior learning, and better align and expand career tech and adult education programs that respond to high demand sectors of the economy.
Protect, grow, and expand existing and innovative “learn and earn” opportunities by elevating blended learning, including online and hands-on training in high-demand fields, and expanding work-based training opportunities that support workers in underserved communities.
Expand and secure a social safety net for underserved communities to remove barriers to quality jobs by assisting low/no-income students, adult learners, communities of color, and dislocated workers in accessing support services that address basic needs such as food, housing, transportation, childcare, and healthcare.
Secure quality broadband access for all by supporting the expansion of reliable high-speed internet access, especially in underserved communities, in addition to ensuring equitable learning and training can continue while physical distancing orders are in place and close the digital divide.
Support workers and employers in COVID-19 response and recovery by strengthening partnerships between business, education, workforce, and community-based organizations; supporting economic stimulus funding and employer incentives to assist businesses in rebuilding capacity and retaining/rehiring their workforce, and reimagining opportunities within the Workforce Innovation and Opportunity Act.
Support the development and implementation of California’s longitudinal data system by ensuring the integration of statewide data across education, workforce, and human services systems is public-facing, transparent, secure, and includes the adult learner and worker voice. Having access to quality public data will help individuals, researchers, policymakers, and advocates inform decision making through outcome transparency and can improve program/institutional effectiveness.
LAO Assessment Framework on Green Stimulus: The Legislative Analyst’s Office (LAO) released a report proposing a framework to assess state-level "green stimulus" proposals. “During economic downturns such as the one California and the United States are currently experiencing, governments often seek to help the economy recover through various initiatives—such as targeted expenditures—referred to as economic stimulus. When such initiatives also have an environmental benefit, they sometimes are labeled as green stimulus. This report is intended to provide guidance for the Legislature on how to evaluate the merits of state-funded green stimulus proposals, including the degree to which they are likely to provide significant (1) economic stimulus and (2) environmental benefits.”
LAO Analysis of the Small Business COVID-19 Relief Grant: The California Legislative Analysist has released its analysis of the Small Business Grant proposal in the Governor’s proposed 2021-22 budget. Highlights and findings include:
The California Relief Grant program was created in December 2020 with $500 million in pandemic-related emergency funds. This program awards grants up to $25,000 to small businesses impacted by the pandemic. The Governor proposes to expand the program by $575 million General Fund in the current year.
The aim of the small business grants- providing targeted financial assistance to businesses affected by the pandemic- is good, but it is not clear whether the program is achieving that goal. The administration has not made available key details about how this program is being administered. Further, applicants and other stakeholders have raised several concerns.
While the rapid launch of the small business grants program was reasonable in the context of the pandemic, we think it would now be prudent to defer immediate action on expanding it until the Legislature can get more information about the existing program and consider ways to improve it, as outlined in our handout.
PPIC Commentary on Recovery: The Public Policy Institute of California released an editorial that was published in CalMatters regarding the state’s challenge in achieving an equitable economic recovery, Commentary: An Equitable Recovery for California Requires Two Key Strategies. “Given the severe economic distress, how can policymakers help our state avoid the pitfalls of previous recoveries, which left low-income Californians further behind? An equitable recovery requires two key strategies: First, target critical support to those most affected in the near term. Second, help people climb the economic ladder in the long term.”
Small Business Credit Survey: The Fed Small Business issued a report, 2021 Report on Employer Firms. Key findings include: Small businesses continue to face significant challenges amid the COVID-19 pandemic, including weak demand, heightened expenses, and limited credit availability. Nearly one-third of firms say they’re unlikely to survive without additional government aid until sales recover. The Fed Small Business is a source of small business research and analysis by the 12 Reserve Banks of the Federal Reserve System.
Small Business Pulse Survey: The US Census Bureau released new data from the third phase of the Small Business Pulse Survey. This data was collected between November 23 and 28, 2020. A selection of results is reported below.
34.8% of responding businesses in California reported that the COVID-19 pandemic has had a large negative impact on their business. This is 6% higher than the national average.
13.3% of responding businesses in California reported they had less workers in the review week than the prior week.
42% of responding businesses in California reported re-hiring employees that had been laid off after March 15, 2020.
State Roadmap for Economic Recovery: National Governors Association issues “State Roadmap for Economic Recovery” to help state leaders respond holistically to the unemployment crisis as well as to recover and build resilience in the post-pandemic economy. The roadmap includes, a recovery framework and a menu of policy strategies; a selection of state examples and additional resources; and four state case studies featuring new details about how state peers are implementing this framework and policy strategies.
