Small businesses have still not fully recovered from the Covid-19 pandemic. A new survey from the UC Berkeley Institute of Governmental Studies shows that California minority-owned small businesses have been struggling most of all.
According to the survey, 18 percent of California Latino small business owners surveyed, and 13 percent of black small business owners said that they had permanently closed their businesses due to the pandemic.
Worse, 77 percent of Latino small business owners, 81 percent of black small business owners, and 82 percent of Asian small business owners reported damage to their businesses from the pandemic, such as less revenue or lower profits, having to layoff workers, or sell or close their business.
As PRI’s Wayne Winegarden documents in the upcoming final paper in the Breaking Down Barriers to Opportunity series, which will be released later this month, government policy is the prime culprit for the negative challenges faced by minority small business owners during the pandemic.
He writes, “throughout the pandemic the regulatory state has been expanding increasing the arbitrariness and costliness of the regulatory burden – the eviction moratoriums that are harming landlords, particularly small landlords exemplify the problem.”
And relief appears to be nowhere in sight. Winegarden notes that, “as there are no signs that the increased regulatory burdens will be rolled back – and amid increasing signs of greater regulatory burdens in the future – the pandemic represents a breakpoint between an environment that was lessening the regulatory burden on entrepreneurs and an environment that is increasing this burden.”
As entrepreneur and bestselling author Carol Roth told us over the summer during a PRI webinar promoting her new book The War on Small Business, government put many additional restrictions on small businesses during the pandemic – including forcing many small businesses to keep their doors shut for months on end – while putting their thumb on the scale in favor of big businesses that could remain open as “essential businesses.”
Government even made programs that were established to help keep small businesses afloat, such as the Paycheck Protection Program (PPP), very difficult to apply for, and very difficult to benefit from. The UC Berkeley IGS poll bears this out. Just 7 percent of Latino small business owners surveyed said they had applied for and been awarded PPP funds. Worse, 58 percent of black small business owners, 56 percent of Asian small business owners, and 54 percent of Latino small business owners said they were eligible but did not apply because the application was too difficult to complete and were lacking help.
Winegarden argues that the massive spending increases during the pandemic – which will be exacerbated if Congress adopts the Biden $3.5 trillion budget reconciliation bill – are ramping up the pressure for higher taxes to pay for the increased borrowing needed to fund these programs. This would, in his view, diminish the returns from starting a new small business and diminish the incentives to start new businesses or expand existing ones.
To empower minority communities economically and encourage more entrepreneurship in California, Sacramento must remove the government-imposed barriers to opportunity that are making it difficult for people to start a business and prosper, create new jobs to hire those out of work, and climb the economic ladder. More regulatory burdens, increased borrowing, and higher taxes to pay for record debt will do just the opposite and result in more small businesses permanently hanging up closed signs.
Tim Anaya is the Pacific Research Institute’s senior director of communications and the Sacramento office.