Great resignation, gig economy bring surge of new DC business

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Call it the big rush.

Despite record unemployment and concerns about widespread business closures early in the coronavirus pandemic, the number of people looking to start and develop their own businesses in the DC area has surged, a Washington Post analysis shows.

While more than 1,000 operations in the sectors including hospitality, construction, entertainment and wholesale businesses, disappeared in the DC metro area in the first half of 2020, the number of new brick-and-mortar businesses rose steadily over the next few quarters, outpacing the number that closed, Bureau of Labor Statistics data shows. That growth — much of which came in education services, healthcare, construction, and finance — doesn’t include online stores, which economists say have also grown.

Covid shut down businesses in downtown DC. Many have reopened – in the suburbs.

Taken together, the District, Maryland and Virginia saw an increase in business license applications from approximately 176,000 in 2019 to 219,000 in 2020 and 262,000 in 2021.

The surge was a surprising by-product of the pandemic, experts said, as new business owners emerged to supplement dwindling income, turn hobbies into jobs or venture into new ventures.

The latter was the case for Teresa Padilla and Geraldine Mendoza, who were fired from their pastry chef and restaurant manager jobs, respectively, following the outbreak of the pandemic in March 2020. Their jobs were among more than 140,000 jobs in the hospitality and lodging industry that disappeared across the greater DC area in the months after the pandemic began, according to BLS data.

But in the summer of 2020, Padilla and Mendoza began selling sandwiches from a Capitol Heights pop-up kitchen and food truck, found success, and then secured their own building. In October 2020, they opened their brick and mortar restaurant Taqueria Xochi, a Mexican fast food restaurant in the district named after the Xochitecatl ruins in central Mexico.

Padilla now works as Executive Chef and Mendoza as Plant Manager. The business grew quickly, Mendoza said.

“It happened unexpectedly and organically,” she said. “Luckily we had many friends who told the town about our food through word of mouth. And that gave us the confidence to push and say, ‘OK, this will work.’ ”

Experts say the local boom in business creation could lead to a surge in innovation and a shift in work culture, forcing companies to review their relationships with workers who have quit in waves for new jobs or gone into business for themselves.

“Over time, we have come to realize that the pandemic is leading to a restructuring of the economy,” said John Haltiwanger, an economics professor at the University of Maryland at College Park. “I think that surprised us [application growth] because at the beginning of the pandemic our economy just shrank enormously – but then it started to turn around.”

In the first year of the pandemic, DC executives expressed growing concern about the dwindling number of business license applications being filed – which would ultimately result in less business tax revenue for the city.

“We know that full recovery will require getting the district’s businesses, owners and entrepreneurs back to doing what they do best, which is sharing their ideas and hiring and serving district residents,” said Brooke Pinto, a member of the DC Council (D-Ward 2 ), said at a spring 2021 committee meeting.

Prince George’s County’s economy is recovering from job losses from the pandemic

Then new trends began to emerge. Among them: Many workers regained key hours in their day when they began working from home in early 2020.

“The pandemic has definitely allowed us the luxury of having more time and energy,” said web developer Nameer Rizvi, who lives in Ashburn, Virginia but works in DC. “It took me two hours to get to the office and two hours back. Having those four hours of the day back definitely helped.”

The newfound time allowed Rizvi and his partner Naomi-Grace Panlaqui – also a web developer – to pursue an idea they launched in early 2020: an app to collect concert listings via DC

Rizvi and Panlaqui called it DC Music Live. For now, they said, they’re still freelance and working regularly while tinkering with the app, which is in its early stages and not yet profitable.

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Experts said the pandemic has accelerated the trend for people to become self-employed, fueled by the emergence of Etsy, Uber and Lyft. A 2019 U.S. Census report released by a team of economists reported that self-employment held a relatively stable share of the workforce for about 50 years — until a spike in the last decade.

“I think in many ways we are witnessing the long-awaited rise of the gig economy,” Haltiwanger said. “I think it’s really evolved in the pandemic, partly because we’ve realized we can actually do it.”

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DC’s Small Business Development Center, based at Howard University, helps aspiring business owners with essential start-up courses in areas such as financial literacy, business advancement and international expansion. In 2019, Executive Director Carl Brown said the center helped 800 people. A year later, that number more than doubled to 1,640 and then hit 1,665 in 2021, he said.

“I’ve never seen it like that,” Brown said. “There are no signs of slowing down.”

Some in the area, like DC resident Will Deatherage, started their own businesses because the pandemic was making it harder to find a job. Deatherage built Catholics for hire – a media advisory group – after his internships disappeared when pandemic lockdowns were put in place.

“I had about 10 or 15 applications that I was pursuing,” he said. “They all went very well. I got a lot of callbacks, a lot of interviews and suddenly the pandemic hit and every single one of those job opportunities – gone. Hiring freezes, budget cuts. A total economic panic.

Today, he and his team help clients with web design, video and podcast production, graphic design, and music composition. Another focus is on the supervision of students and the provision of professional experience.

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Other new entrepreneurs have been part of another side of the pandemic’s workforce reshaping: an explosion of layoffs. From April 2021 to May 2022, an average of more than 4 million people left the country across the country their jobs every month, the highest level recorded since at least 2000, according to BLS data.

Elizabeth O’Donnell was part of the pandemic wave of resignations. O’Donnell, 31, was a DC Public Schools teacher for seven years, but after her daughter Aaliyah was stillborn in 2020 at the age of seven months, O’Donnell said her paid family leave was denied. (DCPS did not respond to a request for comment.)

The experience prompted O’Donnell to leave DCPS and start Aaliyah in Action, an organization providing care for families after the loss of their baby, for which she also serves as CEO.

If employers or industries don’t support workers, O’Donnell said, “people will leave the profession or leave it and look for another place where they are valued.”

How DC-area employers kept workers happy amid the Great Resignation

Local governments play a critical role, said Montgomery County business liaison officer Daniel Koroma, in creating an ecosystem that supports new businesses — with tools like start-up grants, office space and programs to help owners run their businesses properly to lead. But some local jurisdictions and business development hubs, including Montgomery, are finding it difficult to keep up with the recent surge in new business.

In Montgomery, which previously struggled with business start-ups, officials are seeing demand for business licenses and services surge nearly 30 percent since the pandemic began.

“We need to be more inclusive, and by doing that we can help small businesses become profitable in the industry because it’s important that we provide something for them,” said Daniel Koroma, a county business liaison officer.

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Still, Haltiwanger said, most licenses probably won’t become businesses, or if they do, won’t stay in place. In Virginia, more than 30 percent of business licenses established in 2020 have already been canceled or terminated, according to State Corporation Commission data analyzed by The Washington Post.

But that’s common, Haltiwanger said, and mistakes like this often drive innovation. The eagerness of people willing to start new businesses bodes well for the economy because as businesses grow, they can create new jobs, he said.

“Our economy would not exist without experimentation and entrepreneurship,” said Haltiwanger.

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