Trickle-down Growth is not enough for Blacks and Hispanic(6/23/14)

Following the devastating effects of the last recession slow job recovery, government macroeconomic policies have concentrated almost exclusively on growing the economy. However, to restore and rebuild the quality of life in black and Hispanic communities, growth policies alone are not sufficient. We also need strategically focused government policies, whose implementation would directly create high-quality jobs for minorities and increase the flow of income to minority households and communities.

Thankfully, the US economy is finally recovering from the second most severe recession in its history. The recession caused large-scale displacements of the workforce. The most severe adverse effects were felt by minorities; in particular African-Americans and Hispanics. At the depths of the recession, these two groups accounted for 40% of the job losses. Today, workers are being reemployed, but at salaries that are far below those of the jobs from which they were displaced. As a result, America is experiencing a widening income gap between rich and poor. At the same time, the racial wealth divide is even larger. Housing foreclosures and the drop in home equity hit minority groups particularly hard, especially since home-equity comprised a significant share of minority wealth ownership.

The recession ended 4 ½ years ago and only in the last few months has growth appeared more normal. Unfortunately, the devastating effect the downturn had on blacks and Hispanics will not be repaired through macroeconomic growth alone. Consider this, as short as the normal recovery has been, the Fed is already prepared to slam on the brakes the minute signs of inflation appear.

Along with growth policies, the government must act more strategically to restore the number and quality of jobs going to minorities. Furthermore, it must focus more specifically on how to restore the disproportionate loss of income and wealth in minority communities. Macroeconomic growth policies alone are not sufficient.
One of the most viable policies to enhance the quality of life in minority communities is to facilitate the growth of minority-owned ventures; especially those with a high potential for job creation. This is because minority-owned ventures (especially black and Hispanic businesses) are more likely to locate in minority communities, hire minority workers and recycle income and profit within those communities. A national survey of black businesses, conducted by EuQuant, found that 70% of workers employed by such companies were African-American. In addition, workers in those companies occupied more meaningful positions than they did workers in similarly situated nonminority owned businesses.

Supporting the growth of black-owned businesses will not solve all the problems confronting blacks and Hispanics, but it will certainly make a significant bridgehead. More importantly, it represents a more focused strategy than simply growing the economy and hoping the results will trickle down to benefit blacks and Hispanics.

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