Ep. 63: How small businesses led Illinois’ COVID-19 recovery
Both before and after the COVID-19 pandemic, small businesses led Illinois’ job growth. What policies can the state adopt to further encourage small-business growth and promote economic vitality in Illinois? Bryce Hill, director of fiscal and economic research at the Illinois Policy Institute, shares his recommendations on today’s episode.
This edition of The Policy Shop is brought to you by Bryce Hill, director of fiscal and economic research.
New analysis shows the resilience of small businesses in Illinois – in fact, small businesses are leading the state’s job recovery from the pandemic.
Small business, big gains. Businesses with fewer than 20 employees were the only kind to see job growth in Illinois since 2020. The pandemic and state-mandated lockdowns led to job losses that are still lingering with larger businesses. Small businesses have added 53,000 jobs to the Illinois economy since January 2020, while businesses with more than 20 employees are down 180,000 jobs since before the pandemic.
Working through the pandemic. Small businesses bring immense value to Illinois’ economy in terms of supporting and creating new jobs, and that has held true even since the pandemic. Additionally, small businesses were the least likely to lay off employees during the pandemic – larger businesses laid off employees at three times the rate of businesses with fewer than 20 employees. The pandemic affected everyone, but the economic fallout was especially devastating for specific groups. In addition to retailers, restaurant owners and other small business owners, women, working mothers and Black Illinoisans suffered the most in terms of job losses. So did low-income families – 36% of workers in households earning less than $40,000 lost jobs. COVID-19 was devastating, but it’s important to note Illinois had been lagging the rest of the country for years on economic gains and opportunities for the people who call the state home. Those factors helped create a significant number of people who used to call it home.
If you do what you always did, you’ll get what you always got. If Illinois doesn’t change, it’ll mean more public debt: which drives higher taxes, a decline in services and more people leaving. It’ll also make the odds even longer for business owners trying to survive.
As one small business owner put it in 2021:
“With each day that [the government] lets us open up, it is looking better and the weather has been very cooperative,” said Kristan Vaughan, who operates Vaughan Hospitality Group, with six Irish pubs across the Chicago area.
It used to be seven pubs.
“We closed one location permanently and are maximizing PPP and Employee Retention Credit, but Illinois still tries to beat the small business when they are down with the property taxes, fee hikes and more,” she said.
Tax update. More taxes on businesses and reductions in unemployment benefits were looming as a recession approached, but for now there’s reason to hope that won’t be the case. Lawmakers have agreed to replenish Illinois’ unemployment insurance trust fund and avoid those pitfalls. Gov. J.B. Pritzker announced a bipartisan plan to pay off a $1.36 billion deficit in the state’s unemployment insurance trust fund with $1.8 billion in state funds.
Illinois originally held $4.5 billion in unemployment insurance debt from federal loans during the pandemic. Lawmakers from both sides of the aisle still must send a bill to Pritzker’s desk to save taxpayers $20 million in interest.
The agreement means a $1.8 billion payment to the trust fund that will leave $450 million on top of paying off the debt. Illinois was one of only four states that still had an outstanding deficit on their unemployment loans.
The state’s emergency reserves will also benefit from the deal, with the extra $450 million being diverted to the rainy-day fund as it is repaid by business taxes over 10 years. Illinois is aiming to put $3.5 billion into the fund, which in August reached $1 billion after previously sitting at only $1.2 million – enough to operate the state for about 15 minutes.
Looking ahead. With a potential recession on the horizon, we need our small businesses and their job creation more than ever.
Illinois’ business tax environment is among the worst in the region and declining relative to other states. Specifically, Illinois’ second-highest in the nation property taxes and the state’s unemployment taxes remain major hindrances to the state’s business tax climate.
Illinois' small business owners not only have to deal with the same inflation concerns as other business owners around the country, they also have to deal with the third-most regulatory restrictions in the U.S. All those restrictions don't help Illinois fix an unemployment rate that remains the worst in the nation.
Trimming Illinois' regulations would free up small business resources, which translates into expansions and hiring more workers. Illinois is still missing 62,6 00 jobs compared to before the COVID-19 pandemic. Getting people back to work is important for businesses, the economy and Illinois families.
If a recession comes as expected, Illinois will need its strongest job creators – small businesses – healthy to help the state recover. Just like the state’s shoppers should support their local retailers, politicians should do the same.