Increase in Small Business Diversity Mirrors Population

The American population has become increasingly diverse. The latest census of the population indicates that between 2000 and 2010, the Latino and Asian American populations each increased by 43%, the African-American population increased by 12.3% while the white population grew by 5.7%.

This increasing diversity of the population and workforce are common knowledge. But few realize that diversity within the small business sector is occurring even faster than it is within the population.

For example, between 1982 and 2007, African American-owned businesses increased by 523%; Asian American-owned businesses by 545%; Hispanic American-owned businesses by 696%; businesses owned by whites by 81%. Today, minority-owned businesses make up 21% of the nation’s 27 million small businesses.

Today, unlike in the past, the typical minority enterprise is not a marginal establishment engaged in personal service or small-scale retail activity.  In fact, African Americans are most heavily concentrated in health care industries. The largest percentage of Hispanic Latino businesses are engaged in construction and Asian businesses are most heavily concentrated in professional, scientific and technical service industries.

However, the recession hit minority businesses particularly hard, especially Latino businesses because many were concentrated in construction industries. Overall, 21% of small businesses cut their workforce by more than 50%. Among Latinos, 26% reduced their workforce by more than one-half, while only 15% of white business owners did so.

The effects of the recession, anemic recovery, cutback in government spending and tighter lending standards are having a disproportionately adverse effect on minority businesses. Nevertheless, the minority business sector, just like the minority workforce, is critical to the future vitality of the American economy. As a nation, we must acknowledge this momentous change and design smart policies for the increasingly diverse small business sector and labor market.