Recent data point to a rising racial gap in employment and entrepreneurship during the lockdowns. The jobless rate for African Americans rose slightly to 16.8% in May, even as Whites’ rate fell to 12.4%. And a National Bureau of Economic Research study released last week suggests Black entrepreneurs were in a historic fight for their survival during the shutdowns, with 41% of them closing their businesses, more than double the rate for White owners.
Struggles long endemic to minority-owned businesses, such as a lack of banking relationships and access to capital, are at the root of the problem. In metro Atlanta -- where there are more than 7,600 black-owned firms, second only to New York City in the country -- there’s evidence that an economic pandemic is spreading unequally.
With mounting bills, social-distancing restrictions and his own battle with Covid-19, Isaac Thomas saw his long run teaching martial arts to generations of primarily African American students come to an end on May 31, when he was forced to close his Atlanta Taekwondo Academy after 35 years in business.
“We as people of color who are not making a lot of money, it hits us harder,” said Thomas, 70, who was inspired to start his Taekwondo studio out of fondness for Bruce Lee, whom he watched as a teen in Lee’s star-making stint as Kato in the campy 1960s TV series “The Green Hornet.”
Thomas is among about 440,000 Black small-business owners who closed their doors between February and April, the first month after most states shut their economies to try to contain the coronavirus pandemic. The data don’t capture May, when many states lifted restrictions on businesses, and it’s unclear how many firms have reopened since, according to the author of the NBER study, Robert Fairlie of the University of California at Santa Cruz.
Still, if the gap persists, it could worsen the nation’s already steep racial and wealth inequalities, Fairlie said. A lack of access to capital is one major reason, he said, combined, to a lesser extent, with a relative concentration in hard-hit sectors such as barber shops.
Large banks approved 60% of loans sought by White small-business owners, compared with 29% sought by African Americans, according to the Brookings Institution, based on 2018 data from the Small Business Credit Survey.
Access to the traditional banking system has mattered even more during the coronavirus pandemic, because the centerpiece federal rescue program for small businesses, the $669 billion Paycheck Protection Program, is distributed by banks and other approved lenders. African Americans appear to have been less successful getting PPP loans, said Connie Evans, chief executive officer of the Association for Enterprise Opportunity, a nonprofit that works with underserved communities.
“The lack of trust is so deep that they have had to find other alternatives to be successful,” Evans said. “It permeates everything.”
Another impediment may be that businesses owned by minorities generally have fewer employees and less revenue than their White-owned counterparts, according to the Center for Responsible Lending. Because the size of PPP assistance is calculated based on payroll, minority-owned firms are less likely to qualify for larger loans -- the types that would yield greater fees for the lenders and make them a priority at the outset of the program, the center said.
While there’s about $130 billion left in the PPP program, “the lost opportunity for prompt relief may have compounded financial hardship for many businesses and may increase the amount of assistance required to get them back on their feet,” CRL said in a paper.
Long considered one of the nation’s most promising cities for Black wealth and economic opportunity, Atlanta exemplifies the myriad ways that the coronovirus and social-justice issues together threaten to further impact cities.
For Thomas, continuing to struggle with the Taekwondo studio didn’t make financial sense anymore: The business was more a labor of love than big moneymaker. Around mid-March, Thomas noticed something going awry physically: “I know my body and something didn’t feel right,” he said. A test proved he’d contracted Covid-19, and while he never needed hospitalization, his wife of 50 years fared worse and required a hospital stay hooked up to a ventilator.
They both recovered, although a friend who had helped out at the Taekwondo studio for years also caught Covid-19 and died.
Studies have shown that Black people, who have higher rates of chronic illnesses such as diabetes and asthma, are disproportionately harmed by the virus. One study by the Centers for Disease Control and Prevention found more than 80% of people hospitalized for Covid-19 in Georgia were Black -- a state where about 32% of the population is Black or African American.
Thomas’s landlord had been gracious throughout, not demanding payment for April and May while he was shut down. But the June payment was looming when Thomas decided to retire instead of starting up again. Reopening would have brought new challenges, including social-distancing guidelines that would have kept attendance at his studio to 10 or fewer people.
He chose not to apply for PPP aid. Even though the loans are forgiven under certain criteria, Thomas said he was worried about getting “deeper and deeper in the hole.”
In a survey of 500 Black and Hispanic business owners from April 30 to May 12, almost two-thirds said they had either received no assistance or were still waiting to hear whether they will get any funds, according to the poll conducted by the Global Strategy Group for two organizations: Color of Change and UnidosUS. That’s much higher than the national average, based on surveys by the U.S. Census Bureau.
Chloe Floyd operates Pyramid Grocery, the only grocer offering meat and produce for some low-income neighborhoods south of downtown Atlanta. She’s getting by in part because of a $10,000 grant from Hello Alice, an incubator for startups that assists women and underrepresented entrepreneurs. She recently installed a night window so people can buy buy goods without entering the store, but covering her expenses is proving a constant struggle.
“It’s been very challenging,” said Floyd, 39. “I can’t make my quota to pay what it costs to run the business every day.”
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