I was recently given the opportunity to submit testimony to the House Small Business Committee. My remarks helped to inform a discussion on how best to encourage entrepreneurship and economic growth following the pandemic. My advice? Focus limited resources on the small businesses that are hanging on by a thread rather than corporate giants with influential lobbyists on Capitol Hill.
As the president and CEO of Intelligence360, a sales data company that typically services larger businesses, I got a front-row viewing of how the pandemic affected companies differently. Many large firms, which have extensive resources and access to huge credit lines, were able to retool and adjust operations to take advantage of unique pandemic-era business opportunities.
Just look at Amazon. The company’s revenue jumped by $100 billion — yes, billion with a “b” — in 2020. Net profits increased by 84% compared to the previous year. Similarly, while independent restaurants were among the hardest hit by lockdowns, larger chains that were structured to provide delivery services thrived. Domino’s Pizza, for example, enjoyed double-digit sales growth in 2020. More power to them, but Main Street experienced a polar opposite scenario.
While the yearlong health emergency and associated lockdowns affected everyone in some shape or form, small businesses absorbed the brunt of the blow. And sadly, many were financially compelled to shut their doors for good. A tracker developed by Harvard University reveals that the number of open small businesses nationwide has dropped by nearly half compared to January 2020. And for those small businesses that were able to survive, recovery has been slow-moving. According to the latest monthly monitor polling from the Job Creators Network Foundation, only 9% of small businesses have fully recovered.
The challenges faced by small businesses are no surprise. The enterprises typically operate under razor-thin budget margins and are therefore more vulnerable to fluctuating economic conditions or changes to consumer behavior. The coronavirus triggered extremes in both cases. And when it rains, it pours.
Small businesses are now confronting a government-created crisis triggered by the pandemic: labor shortages. Prolonged enhanced unemployment benefits provided by the federal government through states are incentivizing would-be workers to remain at home rather than reenter the workforce. And who can blame them? For those who typically earn $15 an hour or less, current unemployment check levels in some states are more lucrative than returning to the 9-to-5 grind. One recent Morning Consult poll found that 1.8 million have turned down jobs because of the generous unemployment benefits.
The extra lifeline was perhaps necessary last year when local and state governments forcibly closed businesses and left employees hanging out to dry, but now, the inflated aid is sabotaging recovery. Small businesses can’t fully get back on their feet when operating on a skeleton staff. “Help Wanted” signs can be seen on nearly every street corner.
In fact, a natural experiment is taking place that confirms a relationship exists between labor force participation and heightened unemployment handouts. Some states have opted out of enhanced federal benefits while others have left them in place. Now, new government data indicate that residents in states that have blocked the spigot of extra aid are returning to work more quickly.
Coincidence?
It’s undeniable that the U.S. economy is well on its way to recovering from the damage caused by the coronavirus pandemic. But some businesses were harmed more than others. Policymakers in Washington should do anything they can not only to shore up surviving small-business job creators but also to encourage a new wave of entrepreneurship among the next generation.
Craig Etkin is the president and CEO of Intelligence360, a sales data company based in Texas, and a member of the Job Creators Network.
