Covid-19: Impact on Economics Research Paper

Small businesses employ 60 million people in the United States, accounting for more than 99 percent of all businesses. Therefore, they are the most vulnerable businesses to the COVID-19 pandemic's economic effects. For the protection of its citizens, the United States had no alternative but to enforce limitations such as social distancing. However, small businesses, on the other hand, were forced to adapt as a result of these restrictions. Even though the COVID-19 pandemic imposed restrictions for public safety, they have had a negative effect on the economy because small business owners have been forced to rebuild in order to remain open. Small businesses have suffered as a result of the pandemic’s restrictions, while others have thrived despite these additional burdens.

When COVID-19 began, it immediately harmed small businesses because of the restrictions put in place. A survey showed that during the first few months of the pandemic 41.3% of small businesses temporarily closed due to COVID-19 (Bartik, p.6).  The explanation for this is that mandates, such as social distancing and no dining at restaurants, meant that many activities requiring face-to-face interaction had to be cancelled. This brought about a substantial decline in sales, so business plans demanded a change to prevent them from shutting down. Service based industries, such as clothing stores, are small businesses that are more likely to close during tragic times like this. For example, a small business owner named Diana Kane, who owned a boutique on Fifth Avenue in Brooklyn, New York, was one of the victims of the COVID-19 pandemic restrictions. The Diana Kane Boutique was a successful business until “Her clothing sales evaporated — down 78% in April. She couldn’t persuade her landlord to agree to a rent reduction” (Weisman). During this time businesses temporarily closed, leaving them with no customers and no income, which is why Kane asked for a rent reduction. Like many others, Kane did her best to keep the business open, but the boutique closed in May because she did not have enough money or resources to stay open. Since the COVID-19 pandemic suddenly developed, small businesses had little time to prepare, instead owners had to struggle and create new ideas to keep their businesses alive, hoping for the best. However, some businesses fail in this situation because they lack the necessary resources needed to stay open. The regulations have left small businesses that were once prosperous, to suffer which is why the Diana Kane Boutique shut down. Once Kane’s boutique closed that meant many people were affected by it, including her suppliers, customers and neighbors. When a small business is located in a community, a chain reaction occurs because less money is circulating throughout the community. This may seem as if it has a minor impact on the economy, however when thousands of small businesses are shutting down at once, it has a significant effect in harming the economy, thus affecting small businesses. Other small businesses, on the other hand, were forced to adapt in ways that contributed to their success.

The COVID-19 pandemic has also led small businesses, such as restaurants, to reconfigure their plans by using new strategies to achieve success. Owner Dora Herrera has a 44- year-old family business called Yuca’s in California, with two taco shacks located in Los Angeles and Pasadena that are thriving (Brown). Research shows “local business creates a virtuous circle, plowing money and resources back into the community” (Brown). Many family-owned businesses, such as Yuca's, are also community-oriented, which is one of the reasons the COVID-19 regulations are particularly harmful to small businesses, and doing whatever it takes to remain open is crucial. Towards the beginning of the pandemic in April, Yuca’s was plummeting and Herrera was on the verge of shutting down the shacks forever. However, many small businesses were receiving federal loans to help them stay open, so Herrera was able to use her loan to her advantage. The business was so damaged that all her hopes were put into the loan saving Yuca’s, and it shows she did not take the loan for granted. Since no customers were able to buy food at the two locations, due to restrictions put in place, Herrera quickly adapted by networking and using technology to her advantage. Herrera has now gained more knowledge on networking, which is necessary now at this time than ever, and holds virtual cooking classes. Also, Herrera began working with community groups to feed essential workers (Brown), this way she is helping others and helping herself too because more people are discovering Yuca’s during these interactions. As a result, Herrera has built a good reputation for herself and this is crucial during an appalling time like this pandemic. If Herrera did not work hard to find new ways in meeting new people her business could have closed and the loan would have gone to waste. Yuca’s shows that some businesses were able to use this pandemic as an opportunity for owners to learn how to grow in new ways that might be more effective than their old way of running the business. Small businesses are learning about the importance of how engaging with the community will positively affect their business because the word will spread about their new alterations. Even though more stress has been added to small business owners' lives because of the pandemic restrictions, thankfully some small businesses, such as Yuca’s are able to stay open and are now thriving. With small businesses closing, unemployment has skyrocketed because they provide a significant amount of jobs in the U.S. This is why the importance of small businesses using the pandemic restrictions as an opportunity to learn about ways to advance their business plans is important for the economy.

Many small businesses have not been able to cope with the downfall of the economy due to COVID-19 restrictions and others were able to use it as an opportunity for success. Small businesses, such as the Diana Kane Boutique in New York, could not advance their financial situations because of the amount of revenue the boutique lost. Meanwhile, small businesses like Yuca’s in California were able to succeed because the owner turned the available opportunities provided to them, into bright ideas to aid their success. The results from these two businesses show there are no specific trends indicating which small businesses tend to shut down and stay open, but that both have faced economic adversities after the mandate of COVID-19 restrictions. This is a time in life when putting your best foot forward is all you can do and can sometimes make a real difference.