Micro-enterprises have exploded during the pandemic. Now local leaders must support them.

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In the spring of 2021, with the Covid19 pandemic lingering, Kalamazoo Deputy Director of Economic Development Antonio Mitchell had a problem. He knew that many Kalamazoo residents had started businesses during the pandemic, but had no idea who they were, how many there were, and what they needed to be successful?

Kalamazoo was not the only community to see a spike in new microenterprises, nor the only community where local economic development officials were scrambling to figure out how best to identify them and support their success. The COVID-19 pandemic has come as a massive shock to American workers, with many rethinking both their job choice and location. One of the results has been an explosion of micro-business start-ups, as people seek to make up for lost income or start on their own.

As Brookings Metro previously detailed, Americans created 2.8 million more microbusinesses online in 2020 than in 2019. The Small Business Association defines a microbusiness as any business with 10 or fewer employees. Brookings’ analysis used micro business data provided by Venture Forward, an initiative sponsored by GoDaddy, which defines micro business as a business operating from a single location with a discrete domain name and an active website, 90% of which have less than 10 employees.) Their growth offers a new opportunity to more equitably support small business development and help aspiring entrepreneurs, especially among minority communities and economically marginalized residents, who are more likely to exploit these businesses – the opportunity that Antonio Mitchell in Kalamazoo was looking to seize.

But microenterprise growth patterns vary from state to state and community to community. For local economic developers to take advantage of this new opportunity and help these entrepreneurs succeed, they need to understand where these businesses are, how many there are, and what tools and services they need.

In the industrial Midwest, some states with large minority populations have seen a large increase in microenterprise growth from an already high number (Illinois, New York), while others have a relatively low and flat growth curve (Iowa, West Virginia).

These discrepancies are likely related to the fact that minorities are among the most likely to start micro-enterprises, as well as the fact that minority businesses tend to start small and stay small compared to white-owned businesses. Additionally, given that the economic fallout from the pandemic has generally hit minority groups hardest in terms of job losses, it is likely that many have been forced to look for a new way to generate income.

Before the pandemic, black Americans made up 15% of all microbusiness owners nationwide, more than their share of the overall population (12%). By July 2021, the share of black microbusiness owners had risen to 26%. Micro-enterprises were also more likely to be an avenue for those without a university degree – their share of micro-enterprise ownership rose from 36% to 44% over this period.

Looking back across the Midwest, and specifically Michigan, a common pattern emerges. In counties that are home to communities with significant shares of minority populations – including Wayne (home to Detroit), Saginaw, Genesee (Flint), Berrien (Benton Harbor), Kalamazoo and Muskegon – the growth of microbusinesses is widely seen.

County change in microenterprises per capita between August 2019 and March 2022

This contrasts with Michigan counties with smaller minority populations, including several (Grand Traverse, Washtenaw, and Livingston) where residents are significantly better off economically. In these places, there has been a relative decline in micro-enterprises during the pandemic. One exception is Mecosta County, a very white (only 2.7% of the population is black) but very poor rural county, where residents may have faced pandemic income issues similar to those of minorities in core areas. urban.

These trends underscore the new opportunity for public servants interested in supporting marginalized populations and closing equity gaps. In this regard, Kalamazoo, Michigan is an excellent case study in the power of microbusinesses to achieve these goals.

Kalamazoo is a classic midwestern industrial community of medium size (population 75,000), with a large population of people of color (22% black). As with peer communities across the Midwest, it is home to some of the nation’s most intense racial and socioeconomic disparities, which the COVID-19 pandemic has made more damaging, even deadly. Kalamazoo faced challenges common to other older industrial communities, such as the near total collapse of its dominant employer, a pharmaceutical company named the Upjohn Company, and a steady exodus of mostly middle-class residents. whites, to the surrounding suburbs.

But in response, Kalamazoo did a lot of things right. The city has helped licensed Upjohn scientists and engineers start new biotechnology companies. Local leaders have redone their town center to be walkable, creating new businesses. Most famously, anonymous benefactors initiated the Kalamazoo Promise, which guarantees free public higher education throughout Michigan to full (K-12) graduates of Kalamazoo public schools. The pledge marked the community as one that values ​​education, reversing a decades-long population exodus.

Compared to similar industrial communities, Kalamazoo is back on its feet. But economic development leaders realized they had to go further to support the economic success of residents who still couldn’t find their place in a changing economy. By the spring of 2022, Mitchell of Kalamazoo had found 200 majority-minority-owned micro businesses in Kalamazoo and contacted them to ask what their most pressing business development needs were. Officials have found that microbusinesses in general — and especially those run by minorities — face unique challenges such as access to capital, confirmed by research by Pamela D. Lewis of Brookings in Detroit and elsewhere.

Time will tell if, aided by additional data, Kalamazoo can fulfill hopes of keeping its new microenterprises on the path to success. Freelancing is a risky journey, and many will fail. But given the benefits to themselves and their communities if these entrepreneurs are successful, local officials should try to better understand and strengthen the field.

By identifying their budding entrepreneurs, understanding what’s important to their success, and providing the small business support services they can, Kalamazoo and communities across the country can close stubborn equity gaps and open new opportunities. new pathways to economic opportunity for marginalized populations.

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