Minority Business Employment Growth: Effects of the Recession

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Over the last decade, the growth of the minority population has been astounding. The Census Bureau data indicate that between 2000 and 2010, the Latino and Asian populations increase by 43% while the African-American population increased by 12.3%. In comparison, the white population grew by only 5.7%.

Less visible is the fact that business ownership among minorities is growing at an even faster rate. The number of minority-owned businesses, as well as their earnings and employment capacity is growing at rates that far exceed comparable rates among non-minority owned businesses.

Over the last decade, the rapid rise in revenue and employment among minority-owned firms suggest that those firms are becoming well-positioned to help reduce the extraordinary high rates of unemployment in minority communities.

From 1982 to 2007, the following growth patte5rns occurred:

  • The number of African American-owned businesses increased from just over 300,000 to 1.9 million, or by 523%.

 

  • During the same time, the number of Asian-American owned businesses increased from 242,000 to 1.6 million, or by 545%.

 

  • The number of businesses owned by Latinos increased from 284,000 in 1982 to 2 point 3,002,007 or by 696%.

 

  • Woman-owned businesses also increased significantly, growing from 2.6 million to 7.8 million or by 198% .

 

  • Wwhite-owned businesses increased from 12.5 million to 22.6 million or by 81%.

A milestone was reached between 2002 and 2007. For the first time since the Census Bureau began compiling data on minority-owned businesses in the 70s, the number of minority businesses with paid employees increased by an amount that greatly exceeded the respective increases for firms owned by whites. Specifically, the number of minority-owned firms with paid employees increased by 26.5% while the comparable number for white-owned firms was 2.3%.

Likewise, the revenue of minority-owned firms with paid employees increased by 54.9%, while the revenue of non-minority-owned firms increased by only 24.1%. In all previous surveys, the more rapid growth of minority-owned businesses was concentrated almost exclusively among businesses that did not have paid employees. In 2007, those businesses employed 6 million workers, which was equivalent to 5% of the US employed workforce.

Effect of the Recession and Slow Recovery

The Gazelle Index survey, issued in November and December 2011, found that the recession had a significant adverse effect on employment on small and minority-owned businesses. In particular, 49% of all small businesses had a smaller workforce at the beginning of 2012 than they had before the last recession. The survey results showed that 21% of small businesses cut their workforce by more than one-half while 28% reduced it, but by less than 50%. In comparison, 28% of small-business owners experienced no change in the size of the workforce while 22% increased employment.

Businesses owned by Latinos were hit hardest by the recession. Overall, 55% reduced their workforce, 26% did so by more than one-half and 29% by less than one-half. While all groups encountered a substantial reduction in employment, a smaller percentage of white business owners (15%) reduced their workforce by more than 50%. The comparable percentage for black business owners was 24%; for Latino business owners, it was 26% and for male and female business owners respectively it was 22% and 20%.

Clearly, the recession and slow recovery adversely affected employment growth in minority-owned businesses. It will be interesting to see whether those businesses are able to recover fully from the devastating effects.

Available for Download: 1st Minority Business and Economic Report, 2012   The 17 page report is now available. The report analyzes the economy and the 2012 outlook for small businesses owned by minority, women and non-minority CEOs.

Last modified: June 20, 2017

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