Shop Small gets smaller in Illinois, with 11,200 fewer shop owners

Ownership of bars and restaurants also has declined over 70%, thanks to COVID-19 and associated restrictions

After Black Friday comes Small Business Saturday, when Americans are encouraged to support their local retailers. But there will be over 11,200 fewer Illinoisans running retail stores on Nov. 28, thanks to COVID-19 and state-mandated lockdowns.

And when it is time to take a shopping break to eat and drink, there will be nearly 17,600 fewer Illinois bar and restaurant owners to serve you.

Small Business Saturday this year will see 61% of the retail businesses shuttered compared to last year. The carnage has been even worse for bar and food service owners, where 71% are out of the business.

While it is still too early to tell how many of these closures will be permanent, the reinstatement of Tier 3 mitigation protocols Nov. 20 that limit economic activity without substantial government relief of any form make permanent business closures more likely.

It isn’t just business owners who are hurting this holiday season. Illinois’ job counts remain down more than 415,000 relative to pre-pandemic levels. For the accommodation and food services sector, employment is down 108,600 compared to February. In the retail trade sector, employment is down 13,900 compared to February.

Although it may appear that retail workers are not hurting quite as much as business owners in the sector or workers in other areas of the economy, this is likely because many large businesses in the sector somewhat benefitted from the pandemic. Grocery stores, home improvement stores and large online retailers such as Amazon have all seen increases in hiring in recent months.

While increases in employment in any area of the economy are positive signs, these trends reveal the disproportionate impact of COVID-19 and state-mandated lockdowns on small businesses. Making matters even worse, Illinois has experienced two consecutive months of payroll declines, even as the rest of the nation continues its recovery, and more than 100,000 Illinoisans gave up on their job search altogether last month.

Many of the industries that remain the most affected are industries that will be most tightly restricted under the Tier 3 mitigation measures. New mitigation efforts include restrictions on bars and restaurants that close their indoor facilities and occupancy limits on health and fitness centers, hotels, recreational services and manufacturing businesses. Rising cases of COVID-19 and increased restrictions on economic activity will likely result in further job losses and business closures, as was the case under similar circumstances in the spring.

As Illinois enters the holiday season, it is worthwhile recognizing the disproportionate impact the economic downturn has had on boutique businesses. Small business owners take risks to start their own business, provide jobs and enrich their communities, but the rewards of the holidays have evaporated for many of them.

Gov. J.B. Pritzker is continuing to pursue new forms of tax revenue with the potential to do further damage to small businesses, even after voters soundly rejected his progressive income tax hike Nov. 3. The governor has suggested he may now be in favor of raising the state’s flat income tax or closing “loopholes” to raise more revenue, though exactly which loopholes he is referring to remains unknown.

Economists argue against raising taxes during a recession, so lawmakers now must reject Pritzker’s call for a 20% income tax hike on everyone.

Instead, Illinois can improve its fiscal situation and continue to provide core services mainly by implementing constitutional pension reform. There is also the additional possibility of the state receiving federal aid by reforming state finances, if congress adopts the Taxpayer Protection Act.

If Illinois imposes higher taxes on struggling businesses and individuals, it is unlikely it will ever be enough to fix the state’s broken spending system. It could even be enough to make the 2021 Small Business Saturday even smaller.