Where Is the Small Business Advocacy in Normal Times?

Small businesses could lead the US economy out of lock-down, and they should after it too

The U.S. economy may be reopening, but the economic fallout from the COVID-19 pandemic is still all too real, especially for small business.

More than 30 million Americans have filed unemployment claims since early March. That translates to about one in five people who had a job in February. Imagine if Canada’s entire labor force lost work, that’s what has happened in the United States.

Many of these unemployed Americans worked for small businesses, which have been decimated by the economic shutdown. More than half of all small businesses have either closed already or will in the coming weeks. Millions of them may close for good.

That is a big deal. America’s small businesses employ nearly 60 million workers—half of the private-sector workforce. While large corporations dominate the headlines, the small business community generates more than 40 percent of all U.S. economic activity. Even in the age of Amazon and Google, our economy would not be a global leader without the contributions of local bookstores and neighborhood diners.

To the mainstream media’s credit, much of the reporting world has recognized the outsized importance of small businesses in recent weeks. News outlets like CNBC and NPR continue to profile small business owners affected by the COVID-19 pandemic.

And for good reason: When a small business employer is negatively impacted, the employees and their families are bound to suffer. The free market is interconnected, with employers and employees simultaneously feeling the burden of an economic shutdown. You can’t hurt one and not the other.

The mainstream media is especially critical of large corporations receiving government assistance intended for small businesses. CNBC, for example, tracked at least $905 million in Paycheck Protection Program (PPP) funds that were earmarked for small businesses but instead went to public companies, more than 245 of them. Again, for good reason: Your local diner is more vulnerable than a hotel conglomerate, although the latter is vulnerable too.

This begs the question: Where is such fervent small business advocacy in normal times?

While news outlets stand up for small businesses, often to take a swipe at “Big Business,” they were noticeably more reluctant to do so pre-economic shutdown. Outside of business media, rare were the small business testimonials about loan compliance and payroll costs—the sort that CNN now features on a regular basis.

If anything, the mainstream media was less sympathetic to the plight of small businesses, advocating for big-government policies that threaten their financial solvency. News stories extolling the virtues of minimum wage increases have been constant (read here, here, or here). The narrative has primarily focused on the segment of workers earning higher pay while relegating the small business owners who foot the bill to secondary importance.

Those news stories were also quicker to focus on rank-and-file beneficiaries than the segment of workers facing reduced hours and even layoffs because of mandated wage increases.

When the minimum wage is increased, so is the labor cost borne by an employer, large or small. It’s Economics 101: If an employee’s pay is increased to $15 an hour, that employer is essentially forced to pay for that higher wage. The employer’s overhead cost goes up while revenue is unaffected.

Something has got to give.

If that cost goes up too much, an employer may eventually be forced to cut that cost, leading to layoffs and even business closures. This has already happened in cities like New York and Seattle, and it will continue to happen. A business’s bottom line is a matter of fact, not a feeling.

It is worth asking: Didn’t small business owners matter pre-pandemic, just like they do now? Wasn’t their financial solvency relevant? If the threat of the pandemic matters now (which it obviously does), wasn’t the threat of higher labor costs relevant then?

Granted, levels of “threat” are not created equal, but news outlets seem far more concerned with small business prosperity now than back then. Amidst a pandemic, they seem to be far more understanding of tight operating margins and even tighter margins for error.

That is a problem. If times are normal, that doesn’t mean such understanding should go away, replaced by political advocacy.

Then and now, it’s not easy being a small business owner. One in five small businesses fail after their first year. Half fail within five years. Cost-hiking government mandates don’t help them succeed.

We should all be mindful of the small business plight in good times and bad—because small businesses power the U.S. economy, in good times and bad. We must continue to support them with our purchasing power—now and always.

The pandemic is a wake-up call: Small businesses need help, not hindrance. Whether it’s a public health emergency or a burdensome mandate, hindrances need to be called out for what they are.

Luka Ladan is the President and CEO of Zenica Public Relations and a Catalyst Policy Fellow. Prior to founding Zenica, Ladan served as Communications Director at a leading public affairs firm in Washington, D.C.
Catalyst articles by Luka Ladan