The COVID pandemic is consuming the nation’s attention. Yet, one should not lose sight of the fact that deep underlying racial inequalities existed even before the novel corona-virus appeared. It merely has exposed and exacerbated them further. Critical among those inequalities is the status of Black-owned businesses. In the age of Black Live Matter, we must seriously reckon with the fact that Black firms are being pushed to the back of the bus by color blind diversity policies.
Charles Chestnut, the noted Black author, stated one century ago, “Let not the shinning thread of hope become so enmeshed in the web of circumstances that we lose sight of it.” The meaning today is prophetic. As we battle the pandemic, we must continue the struggle to improve the socioeconomic conditions of minorities and marginalized people, especially of Blacks.
With that in mind, it is instructive to take a look at where minority firms were before the pandemic. In a word, there was a browning of the small business sector. By that, I mean minority firm growth was tracking the growth of minorities in the labor market. That is, minority firms were becoming an increasingly more significant segment of the small business sector.
Of the 5.5 million non-public employer-based firms before the pandemic, minority businesses made up 19% and employed 14% of the workforce. Even more notable, their three-year growth trends were as follows: 11 percent growth in the number of firms, 15 percent growth in employment size, and 16 percent growth in revenue.
In comparison, white-owned firms, like whites in the labor market, were barely growing. Over three years, the number of non-minority firms increased by just 1 percent; their employment size grew by only 5 percent, and their annual revenue by just 6 percent.
Small business growth, (the sector that policymakers credit with being the backbone of the economy) was being driven increasingly by minority firms. This fact is tremendously consequential for the future vitality of the labor market. In particular, it means that the long-term health of America’s workforce depends increasingly upon the performance of minority businesses.
While minority firms started from a significant deficit, their rapid progress is good news. The bad news is that among all minority firms, Black-owned firms are still furthest behind by a wide margin. Even though Blacks make up over 12 percent of the population, Black employer-based companies account for only 2 percent of all such firms, only 1 percent of total revenue, and only 2 percent of employment capacity.
While other minority firms were leaping ahead, Black firms (the sector that fought hardest for social and economic inclusion for all) are being pushed further to the back of the bus. A vital part of the problem is the ever-expanding definition of diversity in the business sector and the colorblind application of inclusion policies. Specifically, now diversity is defined by business size, gender, sexual orientation, veteran status, disability status, and other factors. Ironically, corporate sourcing officers and government procurement officers seem more committed to creating opportunities for the more broadly defined groups than for Blacks.
Let me be clear. It is totally appropriate to include all marginalized groups in diversity programs. Nevertheless, the data shows what Black entrepreneurs know too well. The net effect has been to lessen Black business opportunities. The progress of other diverse groups has come at the expense of Blacks – something that should not happen. Blacks started with the most massive economic deficit of all groups, and it remains today.
Inclusive business policies must be intentional and target opportunities for Blacks, even as they seek to benefit other groups. For too long, policymakers have blanketed attempts to be inclusive in colorblind policies. Over the last decade, as the definition of diversity has expanded, benefits to Blacks have declined significantly. Yet, opportunity should not be a zero-sum game.
When corporations want more women managers and executives, they intentionally search for women – not for all groups with the hope of stumbling upon qualified women. If there is to be more progress among Black-owned businesses, then policymakers must be intentional about making more opportunities available to them.