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The Impact of COVID-19 on Small Business Owners: Evidence of Early-Stage Losses from the April 2020 Current Population Survey

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  • Fairlie, Robert W.

    (University of California, Los Angeles)

Abstract

Social distancing restrictions and demand shifts from COVID-19 are expected to shutter many small businesses, but there is very little early evidence on impacts. This paper provides the first analysis of impacts of the pandemic on the number of active small businesses in the United States using nationally representative data from the April 2020 CPS – the first month fully capturing early effects from the pandemic. The number of active business owners in the United States plummeted by 3.3 million or 22 percent over the crucial two-month window from February to April 2020. The drop in business owners was the largest on record, and losses were felt across nearly all industries and even for incorporated businesses. African-American businesses were hit especially hard experiencing a 41 percent drop. Latinx business owners fell by 32 percent, and Asian business owners dropped by 26 percent. Simulations indicate that industry compositions partly placed these groups at a higher risk of losses. Immigrant business owners experienced substantial losses of 36 percent. Female-owned businesses were also disproportionately hit by 25 percent. These findings of early-stage losses to small businesses have important policy implications and may portend longer-term ramifications for job losses and economic inequality.

Suggested Citation

  • Fairlie, Robert W., 2020. "The Impact of COVID-19 on Small Business Owners: Evidence of Early-Stage Losses from the April 2020 Current Population Survey," IZA Discussion Papers 13311, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp13311
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    References listed on IDEAS

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    1. Alexander W. Bartik & Marianne Bertrand & Zoë B. Cullen & Edward L. Glaeser & Michael Luca & Christopher T. Stanton, 2020. "How Are Small Businesses Adjusting to COVID-19? Early Evidence from a Survey," NBER Working Papers 26989, National Bureau of Economic Research, Inc.
    2. Parker,Simon C., 2018. "The Economics of Entrepreneurship," Cambridge Books, Cambridge University Press, number 9781316621714.
    3. Robert W. Fairlie & Frank M. Fossen, 2020. "Defining Opportunity versus Necessity Entrepreneurship: Two Components of Business Creation," Research in Labor Economics, in: Change at Home, in the Labor Market, and On the Job, volume 48, pages 253-289, Emerald Group Publishing Limited.
    4. Lofstrom, Magnus & Wang, Chunbei, 2006. "Hispanic Self-Employment: A Dynamic Analysis of Business Ownership," IZA Discussion Papers 2101, Institute of Labor Economics (IZA).
    5. Ross Levine & Yona Rubinstein, 2018. "Selection into Entrepreneurship and Self-Employment," NBER Working Papers 25350, National Bureau of Economic Research, Inc.
    6. Robert W. Fairlie, 2013. "Entrepreneurship, Economic Conditions, and the Great Recession," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 22(2), pages 207-231, June.
    7. Magnus Lofstrom & Chunbei Wang, 2009. "Mexican-American self-employment: a dynamic analysis of business ownership," Research in Labor Economics, in: Ethnicity and Labor Market Outcomes, pages 197-227, Emerald Group Publishing Limited.
    8. Robert W. Fairlie & Alicia M. Robb, 2008. "Race and Entrepreneurial Success: Black-, Asian-, and White-Owned Businesses in the United States," MIT Press Books, The MIT Press, edition 1, volume 1, number 026206281x, April.
    9. Pekkala Kerr, Sari & Kerr, William, 2020. "Immigrant entrepreneurship in America: Evidence from the survey of business owners 2007 & 2012," Research Policy, Elsevier, vol. 49(3).
    10. repec:eme:rlec11:s0147-9121(2009)0000029010 is not listed on IDEAS
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    More about this item

    Keywords

    shelter in place; coronavirus; COVID-19; self-employment; entrepreneurship; small business; social distancing;
    All these keywords.

    JEL classification:

    • J15 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Minorities, Races, Indigenous Peoples, and Immigrants; Non-labor Discrimination
    • J16 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Gender; Non-labor Discrimination
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship

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