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COVID-19's Impact on Black and Latinx Women-Owned Businesses

Before the pandemic, small businesses accounted for nearly half of all private-sector jobs and two-thirds of net new jobs created from 2000 to 2017. According to McKinsey & Co., the 1.1 million minority-owned small businesses with employees in America are an essential job source, employing more than 8.7 million workers and annually generating more than $1 trillion in economic output. Women own nearly 300,000 of them, employing 2.4 million workers. Small businesses experienced disproportionate job losses during the pandemic, but the pain was even more significant for women of color.

The most vulnerable small businesses face both financial and COVID-related challenges. The differences in vulnerability across sectors create a disproportionate level of risk for lower-income workers, minority business owners, and business owners with less educational attainment. Black women, in particular, are disproportionately essential workers, the hardest-hit workers during the pandemic. Still, Black women are required to work during this crisis, thus, risking their health and the health of their families. Black women are nearly twice as likely as white men to have been laid off, furloughed, or their hours shortened or pay reduced due to the pandemic. More than 58 percent of Black women reported experiencing one of these work crises, compared to less than 31 percent of white men. It is no exaggeration to say that the pandemic has decimated most small businesses and early-stage startups, especially those owned by Black women.

The pandemic has disproportionately affected Black and Latinx businesses, but with these unique challenges also come opportunities. Many women of color that suffered job losses as a result of the pandemic have turned to entrepreneurship. As they have grappled with job losses, financial strain, and lack of childcare, some have found it the right time to start their own business. According to the National Association of Women Business Owners, 5 percent of women started a new business amid the pandemic. About half (47 percent) of this group are minority women. Minority women were also twice as likely to start a new business due to financial need.

Those with existing businesses have had to pivot their business models to reduce risk and seize new opportunities. Data from a recent survey shows that about half of all women entrepreneurs surveyed said they were offering new products/services and marketing differently, with more than a third reporting that these business model adjustments would be permanent. Black women entrepreneurs find it particularly challenging to survive this period of economic downturn. Still, those who temporarily shut down will find it more challenging to reopen. The COVID-19 pandemic led to unprecedented health and financial crisis in the United States starting in March 2020.6The long-term impacts of the pandemic remain primarily unknown. The disruption to small businesses has been extreme. Since March, the economic and financial shocks will likely cause lasting fragilities within the small business ecosystem, particularly for Black women.

Their businesses included hair salons, catering businesses, restaurants, and other businesses significantly impacted by the government-mandated shutdown. The current success of businesses in the above industries depends mainly on how much they have in reserves or are receiving from the federal government in the form of Covid-relief. This new reality poses unique challenges for Black entrepreneurs as little of the $670 billion Paycheck Protection Program (PPP) funding reached Black business owners. This is primarily due to built-in structural limitations, such as stipulations around minimum headcounts and revenue requirements, that disproportionately disqualified many Black businesses. While 4.2 million businesses have received emergency loans from the Small Business Administration, it's a fraction of the 30 million small firms in the nation; many believe Congress' rescue plan is not designed for small businesses, particularly small minority businesses owned by women.

Black, Latinx, and Indigenous women, especially those facing intersecting oppressions, meet the multiple effects of being more likely to suffer job losses due to the pandemic. As a result, various factors, including policy choices grounded in racism and sexism, low-wage workers, single mothers, and women of color, are too often in the economic position to leave the paid labor force to care for their children. Women of color and Black women, in particular, have historically had a much higher level of labor force participation when compared to white women. They also experience many more job disruptions for a myriad of reasons. Because of the combined effects of entrenched racial, gender, and ethnic biases, women of color historically have not been seen as equal to white women or men—and little consideration has been given to their personal needs and challenges.

The blow to the economy will not be felt equally but will fall heavily on women of color. U.S. policies and norms have pushed women of color into the workforce—into jobs that pay less and purposefully have fewer workplace protections. U.S. policies and standards have simultaneously functioned as barriers. In some cases, supports keep white women out of the workforce According to American Progress, decades of government failure to lead on equitable social policy have forced most Americans to go alone during tough times, followed by only incremental Band-Aid-style policy solutions. The current coronavirus pandemic has exacerbated deep, long-standing biases against Black women built into America's systems.

If you want to support Black women and Latina businesses, and the BIPOC community overall, there is no better time to do so than now. Elizabeth L. Carter, Esq., LLC provides below-market-rate legal services and offers flat fees, subscription fees, and installment plans to Black and Afro-Latinx entrepreneurs to be as accessible as possible. For more information on how you can help us support Black and women owned businesses, go to our Legal Fund!

*co-authored by Elizabeth L. Carter, Esq., Managing Attorney

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