Recent congressional testimony from Fed Chairman Jerome Powell and the Fed’s latest Monetary Policy Report indicate the next COVID relief package can best support the economy by focusing on small businesses.

The pandemic’s economic impacts have most burdened low-income workers— especially minorities and women. And the damage they sustain could be long term. 

Forty percent of households with annual incomes of $40,000 or less who were employed in February lost their jobs in March or early April. That compares with twenty percent for the overall population. And employment rates have dropped more for women than men and more for Hispanic, Black and Asian Americans than white Americans.

Furthermore, the report notes laid-off workers who return to their previous employers “tend to earn wages similar to what they were making previously, whereas laid-off workers who do not return to their previous employers experience a longer lasting decline in earnings.”

And since studies show lower-income workers are disproportionately employed by small businesses— typically with fewer resources to stay afloat in a pandemic— they are at greater risk of this earnings decline. 

Despite existing programs, a recent study from the National Federation of Independent Business found nearly half the business owners who applied for PPP and Economic Injury Disaster Loans anticipate needing additional financial support over the next 12 months.

As Congress and the administration look to further stimulus measures, it seems clear that keeping small businesses open and incentivizing them to rehire laid-off workers could make a big difference in both the short and long term.