Double Jeopardy: Covid-19’s Concentrated Health And Wealth Effects In Black Communities

By Claire Kramer Mills, Ph.D

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 reasons why Black firms have been almost twice as likely to shutter as small firms overall. We draw on epidemiological data on COVID-19 cases, Census data on business locations, data on the geographic reach of the Paycheck Protection Program (PPP), and data on small firms’ financial health from the Federal Reserve’s Small Business Credit Survey to examine connections between COVID-19 incidence, policy interventions, and business survival rates. Overall, we find:

• Volumes of COVID-19 cases coincide with Black-owned business locations: two-thirds of counties with high levels of Black business activity pre-COVID-19 are in the top 50 COVID-affected areas. Data from counties nationwide show Black-owned firms are more likely to be located in COVID-19 hot spots, whereas white-owned firms are less likely to be in the most heavily affected areas.

• The Paycheck Protection Program, the federal government’s signature relief program for small businesses, has left significant coverage gaps: these loans reached only 20% of eligible firms in states with the highest densities of Black-owned firms, and in counties with the densest Black-owned business activity, coverage rates were typically lower than 20%.

• Weaker cash positions, weaker bank relationships, and preexisting funding gaps left Black firms with little cushion entering the crisis: even the healthiest Black firms were financially disadvantaged at the onset of COVID-19.

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