Impact Of COVID-19 On Outcomes And Expectations Of Small Business

How Businesses Have Responded To The COVID-19 Pandemic and Lockdown

We are going to discuss the results of our findings in 3 categories. The 1st will be to describe the effect of COVID-19 on the operations of the business and the trend in employment towards the beginning of the crisis.

In the second category, we report the findings on the financial instability of the businesses in the study as expressed through the cash at hand and expenses.

In the 3rd category, we focus on the future expectations of the business on the duration of the crisis and the plans for their economic revival based on the impact of future policies.

Closure of Businesses and Employment Trends.

The 1st question of the survey asked business owners if their business were currently operational at the time of the study. Business owners could provide either of the three answers, that is, the business was operational, closed temporarily or closed permanently.

We also allowed the correspondents to state whether the businesses were closed from the impact of COVID-19 or for other reasons.

From the sample of businesses in the study, 41.3% of the businesses were temporarily closed from the impact of COVID-19.

Only 1.8% of the sample of the businesses were permanently closed because of the impact of COVID-19.

1.3% of the business said they closed down because of other reasons beyond COVID-19.

55.5% of the businesses in the survey were still operating.

We also sought the correspondents to indicate the number of full-time and part-time employees that had been employed “now” as of the survey data and on 31st January 2020.

From all the businesses interviewed, the total number of employees working full-time had dropped by 32% between 31st of January 2020 and end of March 2020.

The number of employees working part-time had fallen by 57% from the end of January.

Generally, the rate of employment as revealed through a headcount fell significantly by 39% from January. The results showing a declining rate of employment included businesses that had closed down temporarily.

Focusing on the operational businesses only, the number of full-time employees had reduced by 17.3% while that of part-time employees also fell by 34%.

In comparison to similar data, the Atlanta Fed surveyed businesses listed on Dun & Bradstreet listings and found there were smaller effects on employment (estimated at 10% fall in employment rate).

The variation in magnitude of employment decline can be explained in that the Atlanta Fed survey included even the larger business organizations while our study focused only on small business organizations. Also, the survey carried out by the Atlanta Fed focused on newer businesses which are likely to experience larger changes in employment rates.

Further, we can compare our findings to payroll data that is released publicly from Automatic Data Processing, Inc. (ADP). The Automatic Data Processing, Inc. (ADP) is a human resource management software which can have different matters of representativeness.  

From this data, the rate of paid employment in firms with less than 500 employees fell by 18% between January and April. Worthy to note, this data considered an employee who received the April pay as an employed staff even if they were let go during that period between January and April.

By focusing on higher-frequency data from paychecks as released by ADP microdata, a simultaneous but independent study of the data by Cajner et al. (15) found employment levels to have fallen by an average of 27% between mid-February and mid-April for the firms with less than 500 employees. Under the same period of study, a 28% decline in employment was recorded for firms that had less than 50 employees.

We found the fall in employment figures slightly smaller compared to a 39% decline recorded by our study on the small businesses but higher than the data provided by the Atlanta Fed survey.

We also tested the effect of geographical variation on the employment levels. Table 1 shows the results for our study across the 11 divisions of the Census.

The table shows the number of businesses that closed down temporarily because of COVID-19 and the decline in employment between 31st January and the date of the survey.

There is no much difference in the results if we separate part-time and full-time employees.

Although there is regional heterogeneity, the disruptions caused by the COVID-19 pandemic are severe in almost all geographical divisions.

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