Whatever the medical benefits that come from prolonged coronavirus locking, the California small business community will suffer severe symptoms, possibly over the next few decades. Small-scale state entrepreneurs, especially in poorer areas, faced large adjustments and possibly annihilation, an increasingly complicated situation for some people with damage stemming from protests over George Floyd’s murder.
These small companies were in a parlous condition before COVID-19. Apart from the extraordinary wealth generated in Silicon Valley and among real estate speculators and entertainment elites, much of the country’s growth in recent years has been in the lower-class service business. As a result, 80% of all jobs created in the state over the past decade have been paid less than the average state income and half of them are well below $ 40,000, according to Marshall Toplansky, a researcher at Chapman University.
California COVID-19 mortality rate is much lower than in the Northeast countries, but our two-pronged economy is very vulnerable to a decline in the service business, and especially in the hotel, retail and restaurant sectors. About 90% of the businesses surveyed this month by BizFed, the Los Angeles County business group organization, have been severely affected and nearly half have experienced a revenue drop of more than 50%.
Before the pandemic, California’s drivers and leaders could convince themselves that the state had developed a new economic model that was progressive and sustainable. COVID-19 and the economic downturn have wiped out fancy facades, like our unemployment rate now beyond the national average, even worse from New York, a U.S. coronavirus outbreak center This is very bad in Los Angeles, where less than half the population now has jobs. L. County has lost 1 million jobs pandemic and suffer from higher unemployment rates than one of California’s main urban areas.
Southern California greater economic vulnerability reflecting, in part, its unusual exposure to some of the hardest hit industries, especially tourism and hospitality and international trade. But economic damage caused by locking up for more than two months spread to industries that depend on selling goods outside the region – such as clothing and medical equipment – and the entertainment industry, which according to recent estimates may have lost more than 100,000 jobs.
If consumers are slow to continue their pre-coronavirus activities, many small companies that have struggled with state business regulations and high taxes may be tempted to go elsewhere. Joseph Vranich, a relocation expert who recently moved his own business from Irvine to Pittsburgh, has identified 2,183 publicly reported California investment release events between 2008 and 2016. However, experts in site selection generally agree that at least five relocations were carried out without public knowledge for any who don’t.
The places with the biggest advantages of California are in Texas, Nevada, and Arizona. Between 2000 and 2013, California was a source of surroundings one fifth of all work who moved to Texas – 51,000 jobs.
Perhaps the most directly threatened, however, are small businesses that are mostly focused on serving the local population. Take a restaurant. Most of the more than 90,000 restaurants in the state are owned and operated by independent owners, who employ 1.4 million food service workers, according to California Restaurant Assn. This generates more sales tax ($ 7 billion per year) than any other industry and about 60% is owned by people of color. Unless the country finds a way to help, 20% to 30% of these restaurants will never open again, the association has estimated.
Like a small business country, many of these companies have not been able to access federal funds to withstand the decline. Washington’s bailout program, even some Republican economists admitted, had been tilted for the sake of Wall Street and large companies. Especially excluded, note local advocates, smaller, often immigrant-run businesses that do not have strong bank relations. They also often lack savings and most of their business is money-based. Others are owned and operated by non-citizens, some of whom are undocumented people.
In many neighborhoods, there is widespread concern that local owners of small shops, apartment buildings and commercial properties will not be able to survive and will be taken over by outside investors without ties to the area. The need for a social distance protocol has worked against small shops that rely heavily on personal contact with customers and cannot make all of their income through online sales. Some already see this trend as an acceleration of gentrification that occurred before coronavirus.
“Business owners are afraid,” advises Mirabel Garcia, who works on micro-loans for East L.A.-based. Inclusive Action for Cities. “They worry they won’t be able to stand against Wall Street and big investors.”
California will emerge from this crisis, but what is the state like? The power of technological oligarchs – the biggest winners during the coronavirus crisis – is likely to advance their hegemony. But the reality for most in the business sector will be far greater: empty stores, ruined dreams, default mortgage and fewer opportunities for the type of entrepreneur who created California’s economic dynamism.
In this economic crisis, the state government needs to pay attention to the interests of grassroots entrepreneurs. This includes helping small companies adjust to new social distance requirements and providing technical assistance so they can compete more with megastores or Amazon. It also means protecting small business owners lawsuits related to coronavirus claims. Actions such as the California 5th Assembly Session, which seeks to severely limit contract work, must at least be postponed at the time of the unemployment record.
Given California’s budget problems that are getting deeper, rooted big state expense and retired, state Not capable to support a lonely business and millions of unemployed workers. There is only so much that can be done to curb the “creative destruction” caused by the pandemic.
But the entrepreneur, if nothing else, is tough. If they are given enough help to survive, they will eventually adjust to new realities, and find new ways to develop for the benefit of all Californians.
“It breaks my heart to see all the empty stores,” said Vivian Bowers, who runs her family dry-cleaning business, which has been in South Los Angeles for 63 years. “But entrepreneurs are tough. In this business we have survived recessions and two riots. Give people a chance and they can come back. “
Joel Kotkin is a Fellow of Urban Futures at Chapman University and executive director of the Urban Reform Institute. He is the author of “The Coming of Neo-Feudalism.” @joelkotkin
