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As early as April 30, approximately one month after countries around the world went into an economic lockdown, The Economist coined the term “The 90% Economy.” This expression refers to an economy that is not only smaller than the pre-pandemic economy, but also a stranger one: less social, less confident, more uneven, and more fragile.
This pandemic has disproportionately affected small businesses, such as restaurants and retailers, that require people to be social, mobile, and confident about their own economic prospects. Bars, many of which have either closed or have been operating at a significantly reduced capacity, perfectly demonstrate what a 90% economy might look like.
There are those that are optimistic about the economic outlook and claim that the economy has not been as severely affected as was previously anticipated at the beginning of the pandemic. However, even with forecasts that the economy will snap back to its pre-pandemic levels by mid-2021, it is important to point out that there is a difference between the Wall Street economy and the “main street” economy.
After examining data from various sources, we found that, despite good news in the front of vaccine development, The Economist’s somber prediction of “The 90% Economy” rings true— at least to the extent of small businesses. Here are 10 highlights that we collected from researchers and surveys during the first quarter of 2021:
- 74% of businesses agree that further government assistance is necessary.
- 81% of minority-owned businesses agree that further government assistance is necessary.
- White-owned business owners are about 3 to 4 times more likely to get assistance from the government (PPP, SBA loan) than minority-owned businesses.
- Black and Hispanic business owners are twice as likely as white business owners to seek delays from existing loan payments, expand line of credit, and to request improved payment terms.
- Overall, 75% to 80% of small businesses are currently in operation compared to pre-pandemic.
- Traffic to U.S. Retail, Grocery, and Restaurant have decreased 27% compared to baseline.
- Small business employment remains 20% to 30% lower than pre-pandemic levels.
- Compared to this time last year, only 50% to 60% of restaurants are open for reservations.
- Share of profitable businesses dropped from around 55% to 34% of total.
It has become clear that local governments are now tasked with supporting their small businesses in ways that extend beyond opening them up for business. After all, even after this period of tight restrictions and collective anxieties, the effects of these safety measures may impact people’s attitudes toward socializing and spending for long after the pandemic has ended. Unfortunately, small businesses will most likely be hit the hardest by this change.
The hardship experienced by small businesses is not merely an economic problem. Looking past the surface level economic data, we see at the core a complex interacting social problem—a lack of awareness, low community engagement, etc. While we patiently wait for vaccine rollouts, communities need to foster a strong sense of solidarity, pride, and civic participation, and everyone has to pitch in. In one survey, 76% of Amazon Prime members said that they are willing to go out of their way and pay more for purchases at an independent, local business. Only when members of a community can be inspired and incentivized to join in the effort by consuming or volunteering locally can the community tackle the underlying social woes that drag the local economy down. This pandemic has created a social and economic landscape that is unlike anything that we’ve seen before. The passage of the American Rescue Plan has presented a new opportunity for government officials to strategically support local businesses and reinvigorate their local economies in innovative and creative ways. we need to come up with innovative solutions for a more cohesive and united community.