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The Solution To The American Economy is The Growth Of Black Business

The Solution To The American Economy is The Growth Of Black Business

Originally posted by Brookings. All credits: https://www.brookings.edu/research/black-owned-businesses-in-u-s-cities-the-challenges-solutions-and-opportunities-for-prosperity/


At a January 17 event marking Martin Luther King Jr. Day, Treasury Secretary Janet Yellen said, “From Reconstruction, to Jim Crow, to the present day, our economy has never worked fairly for Black Americans—or, really, for any American of color.” Yellen’s remarks were an acknowledgement that U.S. policymakers have established racially tilted rules for the economy, prohibiting intergenerational wealth transfers among Black Americans, among many other harms.

According to the Federal Reserve, in 2019, the median net worth of white families was $188,200—7.8 times that of their Black peers, at $24,100. That wealth gap translates to many other disparities, including in business ownership, which is heavily influenced by individual and family wealth. In 2019, there were a total of 5,771,292 employer firms (businesses with more than one employee), of which only 2.3% (134,567) were Black-owned, even though Black people comprise 14.2% of the country’s population.
In support of the Path to 15|55 initiative, which endeavors to grow the percentage of Black-owned employer firms, Brookings published “To expand the economy, invest in Black businesses,” a report that used the Census Bureau’s 2019 Annual Business Survey (ABS) to calculate the national proportion of Black and non-Black businesses in the prior year. The report also calculated the businesses, jobs, and revenue the nation would gain if the percentage of Black-owned employer firms equaled the proportion of Black people in the country’s population.

In this report, we examine those same projections at the metropolitan level using 2018 and 2020 ABS data. (The ABS uses yearly administrative data and representative surveys to compile key economic and demographic information for employer firms and non-employer firms [also known as sole proprietorships], and produces data estimates at the national, state, metro area, county, and economic place level.) Additionally, we explore policy solutions that get at the heart of Yellen’s assertion, recommending structural changes that will enable the economy to work for entrepreneurs of all races.

Before illuminating the lack of Black-owned businesses in U.S. metro areas and the structural reasons behind it, the interactive below presents the revenue, jobs, and wages that places would gain if the percentage of employer firms that are Black-owned was on par with the metro area’s Black population share.

We assume an expansion in the size of the economy such that no gains in Black business revenue or size come at the expense of non-Black businesses. The estimations are based on revenue and payroll data from the 2018 ABS, as the 2019 and 2020 ABS have limited data on revenue at the metro level.

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