June 22, 2020

     Rescue Black Business from the Pandemic

The ever-expanding COVID-19 has just unearthed yet another racial disparity.  Shockingly, 40% of the nation’s Black-owned businesses may permanently close due to lack of customers, lack of federal funding and lack of private reserves.  Many black-owned companies closed when they were determined not to be “essential” from a government perspective.  They are not closing due to lack of talent, ability to serve customers well, or from any form of neglect.  Many Black-owned firms are closing because they do not have the financial strength to weather the worst economic and health calamity the U.S. has faced since the Great Depression.

CBS News reported today that “There were more than 1 million black-owned businesses in the U.S. at the beginning of February, according to research from the University of California at Santa Cruz, which drew from Census survey estimates. By mid-April, 440,000 black business owners had shuttered their company for good — a 41% plunge. By comparison, 17% of white-owned businesses closed during the same period, the UC Santa Cruz research shows.”

While we are still digesting the racial disparity in COVID-19 deaths and reeling from the televised execution of George Floyd, we now must face the fact that one of the true bright spots for African Americans is being erased.  From 2018 to 2019, the number of firms owned by African-American women grew faster than the overall growth rate for women and for Black men, an annual increase of 50%.

Black women start out with less income and less wealth that can be applied to creating a new business.  The long-standing gender pay gap widens for the majority of racial and ethnic groups as women move up the corporate ladder, though not to the same degree. The largest controlled pay gap is for Black and African American women, with Black female executives earning $0.62 for every dollar a white male executive earns.

When it comes to wealth, the racial inequity is even worse.  According to the Brookings Institution, a “close examination of wealth in the U.S. finds evidence of staggering racial disparities. At $171,000, the net worth of a typical white family is nearly ten times greater than that of a Black family ($17,150) in 2016. Gaps in wealth between Black and white households reveal the effects of accumulated inequality and discrimination, as well as differences in power and opportunity that can be traced back to this nation’s inception. The Black-white wealth gap reflects a society that has not and does not afford equality of opportunity to all its citizens.”

  

If the United States and Corporate America are sincere about closing racial economic gaps, here is a prescription:

1.      Corporate CEOs should empower supplier diversity departments to do business with highly qualified companies owned and operated by Black women.

2.      The Small Business Administration (SBA) should increase the size of its Economic Injury Disaster Loan advance from $10,000 to $100,000.

3.      Small Business Development Centers (SBDCs) should be empowered to actively seek out Black-owned businesses to make sure they are aware of the EIDL program and provide application assistance and support. There are 112 SBDCs scattered across the nation that, according to the SBA website, “make special efforts to reach minority members of socially and economically disadvantaged groups, veterans, women and the disabled.”

4.      Given the compelling interest that the nation has in preserving these businesses, and the clear evidence that there is disparate impact on Black people, the Congress should issue another round of PPP loans specifically aimed at under-served Black urban neighborhoods and rural communities.

5.      Given our personal responsibility to our own community, Black people (and all people of good will) should make it a priority to shop with Black-owned companies.

While it may be true that most Black-owned businesses do not employ hundreds of people, most of them do provide a relatively stable source of income for the proprietors, their families and employees.    If 40% of them fail to survive, there will inevitably be increased demand for services such as SNAP (food stamps), Medicaid and other support programs.  Let’s do the smart thing – come together as a nation and throw a safety net to thousands of American companies capable of providing great service during these difficult and unprecedented times.