Hans G. Despain: Small businesses in Massachusetts still need relief

In 2020 the economy fell into a recession, then COVID-19 further devastated the economy, arresting and ravaging the small business sector across the country. In a bipartisan effort several federal programs were launched to minimize the small business destruction.

Massachusetts legislators passed additional small business aid programs in an attempt to keep small business activity in Massachusetts, if not vibrant, at least alive.

Small businesses appreciated the bipartisan effort to pass small business relief, but federal relief funds came to an end in March. The state relief funds, in the celebrated economic development bill An Act Enabling Partnerships for Growth 2021 sponsored by state Sen. Eric Lesser (D-First Hampden and Hampshire) and signed into law by Governor Baker, helped the Massachusetts economy avoid the small business carnage experienced elsewhere in New England, but these funds are simply not enough and need to be supplemented with federal funds.

We can expect a small business genocide if the U.S. Senate fails to act.

According to the U.S. Small Business Administration there are approximately 32 million small businesses in the U.S. which is 99.9% of all businesses in the United States.

The good news is consumer spending in the United States is up 11%. For the Commonwealth consumer spending is up 20%, and in Worcester County 26.7%, since January 2020.

The bad news is that in spite of a significant increase in consumer spending, small businesses are still struggling, especially in New England. In Massachusetts the number of opened small businesses are down 2% since January 2020, in New Hampshire small businesses open are down 25% and in Vermont there are a shocking 40% less small businesses open since January 2020.

Since January 2020 small business revenue in Massachusetts is down 7% and in Vermont small business revenue is down 30%.

According to the Global State of Small Business report, surveys of 23,840 small and medium-size businesses (defined as fewer than 250 employees) across 30 countries, including 5,324 businesses in the U.S., found that 31% of small and medium size businesses in Massachusetts still have lower revenues than before pandemic. They also report that 22 percent of Massachusetts small and medium sized businesses suffered temporary or permanent closure since July 2021.

The report underscores the small business massacre across United States and around the globe.

The U.S. Census in a recent report find that nearly 70% of American small businesses experienced negative (moderate or large) effects on their business caused by the pandemic and the inadequate response from the federal and state governments.

Just as the economy began to return, the U.S. economy was hit by a 40-year high rate of inflation, workers are fed-up with toxic workplace environments and low pay and not returning to previous jobs, and lingering supply-chain issues have made the business conditions arduous.

Business Confidence Indices are plummeting. After becoming optimistic in July 2021, business pessimism has set in. In March the NFIB Small Business Optimism Index decreased by 2.4 points to 93.2, the third consecutive month below the 48-year average of 98.

Associated Industries of Massachusetts shows that the Business Confidence Index in Massachusetts moderately improved in March 2022, but well below historical averages and 3.7 points lower than a year ago.

In March Congress passed $1.5 Trillion spending bill, but small business COVID-19 assistance was removed, effectively telling restaurants and small businesses to take-a-hike.

In response, the U.S. House passed, in early April, The Relief for Restaurants and Other Hard Hit Small Businesses Act of 2022. This gives small business across the country and in Massachusetts some hope of survival.

But the bill now must clear the U.S. Senate following the Easter break. If passed by the Senate, the bill would inject $42 billion into The Restaurant Revitalization Fund and another $13 billion for other small businesses still suffering from the pandemic.

These are vitally needed relief funds. Small businesses are still struggling and according to National Restaurant Association, more than 40% of restaurants fear they may not survive the next six months.

If the bill is passed 177,000 restaurants that were approved for but didn't receive Restaurants Relief Fund grants will be eligible to receive funding. Nearly half of these businesses say they will not survive without the relief funding.

In Massachusetts 1.5 million employees, 45.7%, work for a small business, 99.5% of all firms in Massachusetts are small businesses.

Sen. Edward Markey a member of the Senate Committee on Small Business and Entrepreneurship, and Sen. Elizabeth Warren urged in a letter to the Senate president to include small business relief in the 2022 fiscal budget

The relief funds did not make the 2022 fiscal budget, the U.S. Senate need to follow the lead of the senators from Massachusetts and after the Easter break resurrect relief funds for small businesses and pass The Relief for Restaurants and Other Hard Hit Small Businesses Act of 2022.

Hans G. Despain, Ph.D., is professor of economics and economic chair at Nichols College

This article originally appeared on Telegram & Gazette: Devastated by COVID-19, small businesses in Massachusetts still need relief