Despite years of effort, minority-owned businesses are still drastically underrepresented in the U.S. economy.
According to U.S. Census Bureau’s most recent figures, compiled in 2002, blacks made up 11.8% of the population and owned 5% of all privately held businesses, but the share of business receipts belonging to black-owned firms was a mere 1%. That’s a near 12-to-1 under-representation. According to the same report, Hispanics, 13.5% of the population, owned 6.6% of businesses and earned just 2.5% of revenues. White-owned businesses pulled in 92.5% of revenues.
The U.S. Small Business Association analyzed the “racial effect on business earnings” and concluded that for each dollar a white-owned firm made, a black-owned business made 43 cents while a Hispanic- or Asian-owned business made 59 cents.
Because the data from the Census Bureau’s 2007 business survey hasn’t been analyzed yet, we don’t know the direction of the trend since 2002. But it wouldn’t be surprising if the recession is hitting minority-owned businesses, which are often more vulnerable, particularly hard.
There is a ray of hope. The economic stimulus program, designed to jolt the moribund economy into life, also provides an unparalleled opportunity to help bring more minority businesses into the economic mainstream. If the plan is carried out in a sound manner, it will be a win for both minorities and everyone else.
But some would argue that affirmative action of any kind is dated, and it’s time for minority business owners to stand on their own without special consideration. We’re ready and able to compete with anyone, but that line of thought ignores two realities.
First, it doesn’t recognize that pervasive discrimination still is. It’s often subtler than in years past, but it’s discrimination nevertheless.
Many minority-owned businesses are successful firms with top people and excellent long-term track records. But far too many people think that a “minority-owned business” is code for struggling firm housed in a shabby storefront—or that the business is making it only because of (nonexistent) government subsidies and set-asides. I often come across that misperception in my own business, which has been around since 1953.
Some minority business owners do indeed run tiny firms on a shoestring. We should applaud their entrepreneurial spirit—it’s where almost all of us started. But it is wrong to think that all minority businesses are at this early stage in their development. Many are mature organizations that can compete with anyone—if they’re just given a fair chance.
Second, white business owners usually have better networks, connections, and visibility in the business and political spheres and in the more affluent white community. This doesn’t have anything to do with discrimination, it’s just a fact. As a result, minority businesses owners don’t learn of opportunities and are not on the radar screen of potential clients. So even if we could magically abolish all discrimination and racism immediately, minority business owners would still be at a disadvantage. Additionally, minority businesswomen face both racial and gender barriers.
While fairness demands that minorities get a piece of the stimulus action, economics is an equally compelling argument.