Support Minority Businesses to Increase Jobs for Blacks and Latinos

The ethnic composition of the average neighborhood where Latino businesses are located is 37% Hispanic. Similarly, Black business owners not only locate in neighborhoods that are 44% African American on average, but two-thirds of their employees are black.

The President and Congress are struggling to find ways to reduce the large number of unemployed workers, especially among African-Americans, and to a lesser extent, Latinos. The solution is easy – provide greater support the growth and development of minority businesses.

In October of 2012, the overall unemployment rate increased from 7.8% to 7.9%, however the black unemployment rate increased from 13.4% to 14.3%, and Latino unemployment increased from 9.9% to 10.0%.

The search for a solution to high unemployment has led analyst to focus on the employment potential of small firms. Within this market segment, researchers have intensified their study of start-ups, innovative firms, and the characteristics of firms that are most responsible for creating new jobs and terminating existing jobs.

They have found that the job creation process is complex and multidimensional. To understand it, one cannot just focus on small firms per se. This is because the real job creators are small, start-up enterprises with high growth potential.

Unfortunately, analysts and policymakers have not broken down the small business sector by the racial and ethnic ownership of businesses. Why is this important? The Census Bureau’s surveys of minority-owned businesses indicated that between 1982 — 2007, businesses owned by African Americans increased from 308,260 to 1.9 million or by 523%.

Over the same time frame, the growth in the number of Asian-American businesses was slightly greater than was the growth of African American-owned businesses; they increased from 241,806 to 1.6 million or by 545%.  Hispanics and Latinos businesses grew fastest among all minority groups (with the exception of Native Americans) – from 284,011 in 1982 to 2.3 million in 2007, or by 696%.  Woman-owned businesses also increased significantly, but lagged behind the increase in minority-owned businesses; they grew from 2.6 million to 7.8 million or by 198%.

Minority businesses now comprise 21% of all small businesses and employ about 5% of the total workforce. More importantly, the most recent Survey of Business Owners (2007) indicates that for the first time, the number of minority-owned businesses with paid employees grew faster than did the number of nonminority owned firms with paid employees.

This is a development of significant importance.  In all previous surveys, the rapid growth of minority-owned businesses was confined almost exclusively to firms that did not have paid employees.

Large disparities still remain between the characteristics of minority-owned businesses and non-minority-owned businesses, but it is indisputable that more attention must be devoted to this business sector if we want to address high rates of minority unemployment.