Pandemic Relief Programs Helped Small Businesses Survive, but Fraud Risk Remains

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As small businesses struggled to remain open during the COVID-19 pandemic, programs such as the Paycheck Protection Program (PPP) and the Economic Injury Disaster Loan (EIDL) provided critical funding to cover operating costs and cushion the economic impact.

Research by Public Policy and Economics professor Robert Fairlie, cited in a recent MPR News article, shows the number of active business owners fell sharply from 15 million to 11.7 million, while the national unemployment rate surged to 14.8 percent. PPP loans were rapidly distributed to prevent possible crises, but this also gave rise to opportunities for fraud and error. In Minnesota, for example, 6,900 borrowers were recently suspended amid suspected fraud investigations.

While experts in the field note that there was not enough administrative infrastructure to properly screen loan applications, many believe that the possible crises that could have occurred made the trade-off between helping small businesses stay open and the possibility of fraud worth the risk.

Why Small Businesses Fail: Key Findings from the Wall Street Journal

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The Wall Street Journal breaks down the biggest reasons small businesses fail, drawing on national data, expert insights, and real-world examples of entrepreneurs navigating early-stage risk.

They turned to UCLA Luskin’s Robert Fairlie for his expertise, citing his finding that “only half of new businesses survive two years, and only a third last five years.” The piece underscores how early-stage entrepreneurs often underestimate cash-flow needs and overestimate initial demand, leaving them vulnerable within those early years of growth.

It also points to the advantages held by those with prior business exposure — whether through family enterprises or past industry experience — which can translate into stronger planning, better decision-making, and higher sales. “The children of family-business owners were more successful and less likely to exit,” with family work experience linked to roughly 40% higher sales, says Fairlie.

Fairlie also guides the discussion on financing gaps, especially for minority-owned businesses, explaining that they’re more likely to exit due to limited capital access. His data shapes its core conclusions about why startups struggle and what factors boost survival.

Two New Faculty Members Join UCLA Luskin Department of Public Policy

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This fall, the UCLA Luskin School of Public Affairs welcomes two new assistant professors to its Department of Public Policy: Isaac Opper and Carlo Medici. Both scholars are economists who use empirical research and data-driven methods to explore policy-relevant questions that shape education, labor markets, and public institutions.

“We are excited to have recruited two extremely talented economists who we expect will not only contribute to scholarly research but also contribute to informing policy,” says Robert Fairlie, professor and chair of the public policy department. “They are both studying topics of utmost relevance. Students in our program and more broadly at UCLA will benefit from their expertise in microeconomics, statistics, and policy topics around immigration, labor, education, and other topics.”

Isaac Opper, an applied microeconomist, focuses on education policy and the statistical methods used to evaluate its effectiveness. “My largest body of work studies how education policy can be designed to improve student outcomes,” he said. This year, he will teach required statistics courses for both undergraduate Public Affairs and Master of Public Policy students. Opper added that he’s eager to “move from evaluating specific policy interventions to thinking more broadly about public policy,” continuing a career devoted to evidence-based reform. 

Carlo Medici, whose expertise spans labor economics, political economy, and economic history, studies the interaction between immigration, labor markets, and institutions. “I’m especially looking forward to working with colleagues and students who are passionate about how institutions and policies shape the economy,” Medici said. His research draws on both contemporary and historical data to illuminate the roots of modern policy challenges. 

Fairlie on Hispanic Business Ownership

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UCLA Luskin Public Policy Chair and Professor Robert Fairlie was quoted in a ShareAmerica feature on the growing number of Hispanic and Latin American entrepreneurs in the United States and how their contributions are boosting the economy. The story cites research from Stanford Graduate School of Business’s “State of Latino Entrepreneurship” report published in March 2024 which showed a 57% increase in Hispanic entrepreneurship between 2007 and 2022, with about 5 million Latino-owned businesses contributing $800 billion to the U.S. economy. The story also cites U.S. Department of the Treasury data showing that almost a quarter of new entrepreneurs in the U.S. were Latino in 2021. Fairlie suggested that this increasing entrepreneurship is partially due to immigrants who start businesses at a higher rate than non-immigrants. “Immigrants take some initiative to leave [their countries of origin] and come to the U.S., and thus might be more risk-taking and entrepreneurial,” Fairlie said.

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Fairlie on Trend Toward ‘Pint-Size Startups’

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Robert Fairlie, chair of Public Policy at UCLA Luskin, spoke to the Wall Street Journal about “pint-size startups,” new business ventures that are operating with relatively lean staffs. While the number of people taking initial steps to launch a business surged during the pandemic, the average number of employees they hired fell sharply. Reasons for this trend include pandemic-related headwinds that have slowed hiring and entrepreneurs’ decision to keep operations small to maintain a healthy work-life balance. Keeping head count down can make it easier for young businesses to adapt to the ups and downs of the economic cycle, Fairlie said. “At some stages of growth for a small business, it can be pretty valuable. They have that flexibility,” he said. “At some stages of growth, it will hurt them.” Contractors tend to be less loyal than full-time employees, who are more likely to be committed to a company’s success, Fairlie explained.

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A Spike in Entrepreneurship Among Latin American Immigrants

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Robert Fairlie, chair of UCLA Luskin Public Policy, spoke to the Wall Street Journal about a spike in entrepreneurship among Latin American immigrants, who are starting businesses at more than twice the rate of the U.S. population as a whole. Startups of all types swelled in 2020, as COVID-19 upended work lives, changed consumer behavior and created business opportunities, according to an analysis of U.S. Census data conducted by Fairlie. “COVID has put us on a different trajectory,” he said. One reason that Latin American immigrants have maintained a strong entrepreneurial momentum is their focus on sectors that have experienced increased demand since the onset of the pandemic, including food, services and delivery, Fairlie said.

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Fairlie Discusses Economic Impact of High Unemployment in California

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Robert Fairlie, a professor of economics and public policy, recently discussed the long-term implications should the state’s job growth continue to lag behind the national average. Joblessness reduces overall earnings, said Fairlie, chair of UCLA Luskin Public Policy, and that lowers consumer demand and hinders investment. “There is a negative multiplier effect on the state economy from the higher unemployment rates we are seeing,” he said. The story in the New York Times, which was picked up by other news outlets, focuses on the impacts of California’s high unemployment rate — 5.1% in January, which exceeded the national rate of 3.7% and was behind only Nevada’s rate of 5.4%. Among the contributing factors explored in the story are layoffs in the technology sector, a slow rebound in Southern California from prolonged strikes in the entertainment industry and varying demand for agricultural workers.

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Keeping Guard Against the Forces Behind Jan. 6

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Sandeep Prasanna MPP/JD ’15 returned to his UCLA Luskin alma mater to share a pressing message about the Jan. 6, 2021, attack on the U.S. Capitol: The threat is not over. Prasanna served as investigative counsel for the House Select Committee that issued a comprehensive, 800-page report on the insurrection. “January 6th was not just one event. January 6th was and is an ongoing effort to undermine our democratic institutions,” said Prasanna, whose team spent months interviewing or deposing about 1,000 right-wing extremists who carried out the attack. Now a senior advisor at the law firm Miller & Chevalier, he travels the country to speak with election officials about continuing threats to free and fair voting — including how to safeguard the essential workers who keep the democratic process running smoothly. Prasanna’s comments came at a Feb. 12 event marking the 25th anniversary of UCLA Luskin’s Public Policy program. Chair Robert Fairlie presented him with the 2022 MPP Alumnus of the Year Award, and Professor Mark Peterson led a conversation that touched on Prasanna’s time at UCLA. “I don’t think anyone starts a career in D.C. feeling prepared because things that you learn in a textbook are so different from interacting with people in real life,” Prasanna said. “But the thing they say about law school is that they teach you how to think like a lawyer. What I feel I learned at Luskin was how to do.” He encouraged UCLA Luskin students to take advantage of internships and other opportunities on the East Coast. “There’s a lot of work to do in California, for sure,” he said, “but I think D.C. could use more Luskin grads.”

Learn more about events marking Public Policy’s 25th anniversary. 

View photos of Prasanna’s talk on Flickr.

A Conversation With Sandeep Prasanna MPP/JD ’15

 

Michael Stoll Joins Board of Directors of American Institutes for Research

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Michael Stoll, professor of public policy and urban planning at UCLA Luskin, is one of two new appointees to the American Institutes for Research Board of Directors. Stoll, an expert in labor markets and the impacts of poverty, joins Mayra E. Alvarez, a national leader in public health policy and systems, on the board of the nonprofit organization, which is based in Washington, D.C. “We are excited to have Mayra E. Alvarez and Michael A. Stoll on the board and welcome the deep expertise they bring to key areas of AIR’s work,” said Patricia B. Gurin, chair of the AIR board. “Their experience, knowledge and insights will help the board guide the institution’s strategic direction today, and in the years ahead.” David Myers, chief executive officer of AIR, said that Stoll will join a group of experts who will provide guidance and understanding to AIR’s leadership team and ensure that the organization’s research and technical assistance work is “relevant, meaningful and mission-focused.” Stoll has previously served as a fellow for the institute, which is focused on behavioral and social science research and providing technical assistance to solve national and global challenges. He has also been a fellow at the Brookings Institution, the Institute for Research on Poverty at the University of Wisconsin, Madison, and the National Poverty Center at the University of Michigan, Ann Arbor. He has served as a past visiting scholar at the Russell Sage Foundation. In congratulating Stoll, Professor Robert Fairlie, chair of UCLA Luskin Public Policy, said, “AIR is an amazing place doing extremely important and impactful work.”

 

A ‘Hesitantly Bullish’ Take on U.S. Unemployment Trends

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A WalletHub article on U.S. states where unemployment is ticking up cited Robert Fairlie, chair of Public Policy at UCLA Luskin and a member of the National Bureau of Economic Research. “I’m hesitantly bullish on the job market for 2024,” said Fairlie, explaining that national jobless rates are still relatively low and are not likely to increase rapidly in the coming year. But he added, “The major problem many people have is that their wages are not increasing as fast as inflation. That is making it hard for people to afford to live, especially in high-cost housing markets.” Moving savings out of non-interest-earning accounts and into money market funds that pay a higher interest rate is one way that people can protect their finances, Fairlie said. 

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