Millions of Small Businesses Closed in 2020: The Long Recovery Ahead

By SBE Council at 21 January, 2021, 1:27 pm

by Raymond J. Keating-

The devastation from COVID-19 has been brutal. According to the Johns Hopkins Coronavirus Resource Center (accessed on January 20), global deaths due to the pandemic have topped 2.06 million, and that includes more than 401,000 in the U.S.

And if that weren’t bad enough, people have suffered from an economic standpoint. Employment has taken a major hit. Even with some recovery occurring from May to December, the December 2020 level of employment was down by 8.9 million jobs compared to the pre-pandemic February 2020 level.

And of course, small businesses have been hit hard.

Consider that, according to the SBA’s Office of Advocacy (based on Census Bureau data), there are (or were) 31.7 million small businesses in the United States.

If we go to TracktheRecovery.org, which is a project of Harvard and Brown universities, the latest estimates (accessed on January 20) point to 29.7 percent of small businesses closing from January 2020 to the end of December 2020.

Applying that percentage of closures to the universe of small businesses results in an estimated 9.4 million small businesses closed up.

Now, that would be up from the depths hit in mid-April when 44 percent of small businesses were closed. Also, we do not know how many of these businesses are closed permanently.

But the bottom line still points to an estimated 9.4 million businesses being closed – some temporarily and some permanently.

Once we move beyond the Band-Aid efforts, vaccines are widely applied, and the pandemic truly is being put behind us, serious efforts will be needed by policymakers at the federal, state and local levels to provide a sound foundation upon which entrepreneurship and the necessary accompanying investment can flourish.

That means rejecting misguided political thinking that point to increased taxes, more regulation, protectionist trade policies, and government controls, subsidies and industrial policies. Make no mistake, this economy will only recover and grow when entrepreneurs and investors are incentivized to take risks, and that not only means dealing with the pandemic, but it means expanding economic freedom – via tax and regulatory relief, and free trade – so that entrepreneurs, businesses, investors and workers are able to innovate, repair, build, create, and serve consumers.

It’s going to be a long climb back, followed by the need to enter into a period of true growth. Policymaking at all levels of government can either make that journey longer and more arduous via increased burdens and interference, or it can clear away governmental burdens so that the private sector can quicken the pace of recovery and reinvigorate growth.

Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council.