By many measures, 2020 — a year dominated by an emerging pandemic and overrun with natural disasters — was bad for business. A multitude of variables affected the ability of businesses to adapt, but according to new research, demographics were closely tied to impacts on small businesses.
A study carried out by researchers at the National Institute of Standards and Technology (NIST) and the National Oceanic and Atmospheric Administration (NOAA) revealed that businesses run by minorities, women and veterans, which they call historically underrepresented group operated (HUGO) businesses, were dealt a much worse hand by the pandemic than other businesses. What’s more, the team saw that HUGO businesses reported harsher downturns from COVID-19 alone than even non-HUGO businesses that were struck by natural disasters on top of COVID-19. The findings, published in the International Journal of Disaster Risk Reduction, stress the severity of the resilience gap between HUGO and non-HUGO businesses but also pave routes forward for research that could help struggling businesses.
“Based on the self-reported responses, we found that businesses belonging to the HUGO group are more likely to experience things like business closure, decreased revenue or decreases in the number of customers,” said Payam Aminpour, a NIST postdoctoral research fellow and co-author of the study.
The team’s findings are based on responses from more than 1,350 businesses to a survey NIST and NOAA distributed from July to August in 2020.
The researchers initially developed the survey to learn about the combined impact of the pandemic and extreme weather events, including sudden disasters, such as hurricanes, earthquakes and wildfires, and longer-lasting events, such as droughts and winter storms. By collecting that information, the researchers sought to potentially uncover opportunities for federal agencies and other institutions to offer support effectively.
A report published in October 2020 offered a broad overview of the responses, but the authors of the new study sought to gain deeper insight into the role that specific factors played in determining a business’s resilience during the pandemic. One such factor was the demographic information of the people operating businesses.
“Once we looked closer at the data, there were differences for HUGO businesses that shocked me and we had to dig deeper,” said NIST research economist Jennifer Helgeson, lead author of the study.
Helgeson and her co-authors gauged the effects of COVID-19 by assessing business operators’ answers to survey questions about specific issues including closure, revenue declines and supply chain interruptions, as well as some of their broad perceptions regarding their situation. Then the researchers performed a statistical analysis to compare HUGO with non-HUGO businesses.
The experiences of the two groups differed greatly, with HUGO businesses faring far worse when confronting the challenges presented by 2020.
“You have problem A for everyone, which is COVID, and some businesses are also experiencing problem B, which is a natural disaster. And then on top of that, others are experiencing problem C, which is having higher levels of social vulnerability,” Aminpour said.
The findings were supported by the business operators’ perceptions. The proportion of HUGO businesses that strongly agreed that COVID-19 posed the greatest risk to their survival was nearly 20 percentage points more than that of non-HUGO businesses. This difference was over 10 percentage points for the proportion of HUGO businesses that strongly agreed that the pandemic would leave them unable to cope with a natural disaster in the next year, as compared with non-HUGO ones.
One survey respondent expressed how existing hurdles played into their experience, writing, “I am already a minority because I am a female who owns a [male dominated sector business] and I have struggled to get ahead; now it is [even more] difficult to do [because of COVID-19].”
On average, a HUGO business was more than twice as likely to report the negative effects of COVID (regardless of whether it experienced a natural disaster) than a business that experienced a natural disaster during the pandemic (regardless of whether it belonged to the HUGO group). In other words, simply being operated by minorities, women or veterans increased a business’s odds of being susceptible to the pandemic more than natural disasters did.
In their search for specific explanations as to why demographics were tied so closely to a business’s experience with the pandemic, the researchers noticed that the surveyed HUGO businesses were more likely to be categorized as nonessential, had fewer employees and reported less disaster preparedness on average compared with non-HUGO establishments.
To the authors, it seemed feasible that these factors could explain the differences between the two, but when they controlled for their effects in the equation, reducing their influence in the overall HUGO and non-HUGO comparison, the demographics-linked effect persisted. HUGO status was still a strong indicator of whether a business would be hit hard by COVID.
“We were able to disentangle the compounding impacts of being a part of the HUGO group from the impacts of other related factors, but with this dataset, we’re not able to pin down the mechanism by which being part of the HUGO group increases relative impacts,” Helgeson said. “We do have some good guesses from this new research and anecdotes provided by survey respondents.”
The study narrows down the potential culprits for the gap in resilience, suggesting that important clues lie under the stones that have long been left unturned in this research area.
“It is critical that we understand how climate events amplify existing social and economic vulnerabilities,” said Ariela Zycherman, a co-author of the paper in NOAA’s Climate Program Office. “For HUGO populations in particular, research like this demonstrates the ways preexisting social inequities threaten resilience. This information is essential for supporting just climate futures across communities.”
Although studies typically report who is granted support, they often leave out numbers about who applied and did not get support, or perhaps did not even know how to apply for support. Other relatively unexplored factors that play a role could include credit scores, access to loans and social capital accessed by business operators.
“These factors likely aggregate over time to limit HUGOs’ learning, agency and flexibility — all critical to being resilient when there is a sudden disturbance. But we need to know more about the interplay of socioeconomic systemic barriers and how business operators interact to build resilience capacity,” Helgeson said.
Critical information might also lie in the way that businesses think of disaster resilience — what resources they are aware of and how they use them.
“The surface has not even been scratched to understand how HUGO businesses understand their business resilience. If we map out how they view business resilience, will we find a difference from their counterpart businesses?” Aminpour said. “We really want to go in that direction where we’ve just seen no one else go.”
By developing and distributing a follow-up survey that incorporates new techniques to decipher the remaining elements, the researchers hope to identify or inform new methods of offering HUGO businesses a helping hand.
Paper: Jennifer F. Helgeson, Payam Aminpour, Juan F. Fung, Alfredo Roa Henriquez, Ariela Zycherman, David Butry, Claudia Nierenberg and Yating Zhang. Natural hazards compound COVID-19 impacts on small businesses disproportionately for historically underrepresented group operators. International Journal of Disaster Risk Reduction. Published online Feb. 11, 2022. DOI: 10.1016/j.ijdrr.2022.102845
NOAA Media Contact: Monica Allen, Director of Public Affairs, NOAA Research, monica.allen [at] noaa.gov, (202)-379-6693