As the COVID-19 outbreak rages across the United States, the populace does whatever it can to make the most of these trying times.
With an outreach code Global Entrepreneurship Index of 83.6, America is fertile ground for starting a business. However, it’s as beneficial for entrepreneurs as it is dependent upon them. Saying that the broad sweep of corporate shutdowns is wreaking havoc is an understatement.
Philadelphia is buckling under this financial pressure due to a few compounding factors. And it’s these factors that we are going to discuss here.
Worrying Unemployment and Poverty Rates in Philadelphia
The economic conditions in Philadelphia have been far from optimal even before the onset of COVID-19.
Philly has been suffering from above-average unemployment rates for a while. Whereas the average for the entire US is 3.8 percent, the rate in this city stands at 5.9 percent. On top of that, Philadelphia also boasts the highest poverty rate among the United States’ largest counties. Rising as high as 24.51 percent, it exceeds the national average by a long shot (nearly double the 13.88 percent rate across the country).
These problems alone are enough to place the city in a compromised position when saddled with the coronavirus pandemic.
But, unfortunately, the story gets even worse.
Philly’s Dependence on Small Businesses
Philadelphia has 28,164 established businesses, over half of which employ fewer than five people. While it’s not a particularly high number when compared to other counties of similar size, it’s the composition of these businesses that puts them at a disadvantage during the pandemic.
Namely, most of the industries present in Philly are largely the ones that cannot operate with social distancing and self-isolation measures in place.
The city relies heavily on sectors like retail, wholesale, food and accommodation businesses, as well as those labelled “Other Services” (personal services, laundry, etc.). In fact, food and accommodation alone comprise 14 percent of Philly’s small businesses, 3 percent more than other places of such size.
These services, in most cases, cannot function in the telecommuting setting. Moreover, Philadelphia also has among the smallest shares of businesses in the professional service sphere — the sphere most likely to be compatible with remote work.
Who Needs These Businesses the Most?
The small businesses in Philadelphia serve low-income communities the most. Data from the Household Pulse Survey reveal that impoverished areas depend on those services more than anyone else.
In particular, predominantly Black and Hispanic low-income neighborhoods will bear the brunt of the financial losses. Most of the workers coming from these demographics will have found themselves without work.
The Severity of COVID-19’s Impact on Philadelphia’s Employment
The spread of the coronavirus and subsequent government measures are making an already-difficult economic situation even more pronounced.
As many as 17,000 of Philadelphia’s small businesses are expected to feel a major impact from the economic shutdown. That’s around 63 percent of all small businesses in the city, 13 points above the national average.
And hope for survival is low among establishment owners. A mere 47 percent of businesses believe they will live through the next year, should the crisis last four months or more.
The pessimism is well-founded, given the rampant layoffs and general unemployment in the wake of the pandemic. A whopping 21 percent of Philadelphia’s workforce (around 150,000 people) has filed for unemployment.
As such, the predictions for Philadelphia’s small business economy are far from favorable.
Persistent layoffs and prolonged unemployment will lead to an even greater poverty rate, in addition to setting back the city’s eventual recovery. And the erasure of long-standing restaurants, shops and other local touchstones in the city could permanently detract from Philly’s unique culture.
Business Relief Efforts in Philadelphia
Various government branches were relatively quick to provide assistance to Philly’s small businesses. This help mainly came in the form of emergency programs and relief funds.
For one, there’s the $9 million COVID-19 Small Business Relief Fund that provides loans and grants to businesses. A helping hand also came from the $60 million COVID-19 Working Capital Access Program.
Sadly, both of these sources ran out of steam a week after opening their doors. Beyond that, minority-owned businesses in low-income areas have had a hard time getting their hands on any form of financial relief.
On the federal level, the CARES (Coronavirus Aid, Relief and Economic Security) Act was meant to cover for $349 billion in forgivable loans to businesses. Again, the loan requests deluged, meeting the full capacity of $349 billion within 72 hours.
The US Treasury seeks to expand that budget to around $550 billion. However, given that small businesses contribute a far larger $6 trillion, it may be nothing more than putting a Band-Aid on a gun wound.