America Becoming Racial Trends and Their Consequences: Volume II (2001) / Chapter Skim
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9. Trends in Minority-Owned Businesses
9. Trends in Minority-Owned Businesses
Pages 190-221
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From page 190... ...
These programs created important points-of-entry for minority entrepreneurs, allowing Blacks unprecedented opportunities for diversification in choice of business ventures. This new stage in minority business ownership began with the abatement of racial segregation in the 1960s.
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From page 191... ...
And these new owners relied, to a great extent, on public-sector markets. For the first time, a significant number of Black businesses emerged in large-scale, public-works construction contracting and subcontracting, architectural and engineering services, management and consulting services, data processing, computer sales and services, public relations, and other industries closely tied to public-sector procurement opportunities.
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From page 192... ...
Finally, survey results indicate that 83.6 percent of employees in Black-owned firms were Black. Among businesses located in the city, 81.8 percent of their employees were Black, and 84.9 1The Atlanta Business League, the City of Atlanta Office of Contract Compliance, Atlanta Public Schools Office of Contract Compliance, Fulton County Office of Contract Compliance, Georgia Minority Supplier Development Council, Dekalb County Office of Contract Compliance, Grady Health Systems Disadvantaged Business Enterprise Program, and the Metropolitan Atlanta Rapid Transit Authority.
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From page 193... ...
MAJOR IMPROVEMENTS FROM THE PAST Aldrich and Waldinger (1990) assert that minority business success is built on the interaction between opportunity structures and group charTABLE 9-2 Mean Percentage of Minority-Owned Revenue from the Government Sector, by Group, 1995 Survey Number of Percent of Minority Mean Respondents Respondents Survey Group Percent to Question to Survey Respondents Black 34.4 207 223 70.6 American Indian/ Alaskan Native NDa 3 3 0.9 Asian American/ Pacific Islander 33.2 16 17 5.4 Hispanic American 28.6 20 21 6.6 White women 19.1 41 45 14.2 Unclassified 13.7 6 7 2.2 Total 31.5 293 316 100 Note: Ownership lists based on businesses registered with seven public agencies in Metropolitan Atlanta, Georgia.
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From page 194... ...
As recently as 1987, only 18.5 percent of Black business owners reported having prior managerial, executive, and supervisory experience; whereas 30.0 percent of nonminority male business owners reported having such experience. Similar figures for Hispanic business owners and other minorities were 18.8 and 26.6 percent, respectively.
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From page 195... ...
Furthermore, Black entrepreneurs faced the very real possibilities of receiving either physical harm or destruction of their property by antagonistic White competitors or bigots. In 1972, at least 35 percent of all Black-owned businesses operated in just four industries food stores (6.3 percent)
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From page 196... ...
11,4C 38,7C 7,27 21.5' 2.9 3.7' 12.6' 2.4 $2,214,79 $820,1~ $619,05 $551,05 $224,44 23.0' 8.5 6.4' 5.7' 2.3' aData adjusted by the U.S. Census Bureau to exclude 1120C corporations (Internal Revenue Service Tax Form 1120C)
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From page 197... ...
THOMAS D BOSTON 197 .t Change 1982 1982 1987a 1992a 1982a to 1992a 308,260 424,165 620,912 101.4% $9,619,000 $19,763,000 $32,197,000 234.7% 66,312 89,359 114,100 72.1% 8,919 8,952 8,466 -5.1% 11,406 11,834 13,832 21.3% 38,709 56,772 76,988 98.9% 7,278 11,801 14,814 103.5% 21.5% 21.1% 18.4% -14.6% 2.9% 2.1% 1.4% -52.9% 3.7% 2.8% 2.2% -39.8% 12.6% 13.4% 12.4% -1.3% 2.4% 2.8% 2.4% 1.1% $2,214,792 $3,472,210 $4,785,902 116.1% $820,155 $1,001,462 $979,773 19.5% $619,093 $1,084,468 $1,785,569 188.4% $551,099 $959,696 $1,468,760 166.5% $224,445 $426,584 $551,800 145.9% 23.0% 17.6% 14.9% -35.4% 8.5% 5.1% 3.0% -64.3% 6.4% 5.5% 5.5% -13.8% 5.7% 4.9% 4.6% -20.4% 2.3% 2.2% 1.7% -26.6% $51,854 $41,945 $115,730 $129,090 $19,078 $37,249
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From page 198... ...
By contrast, the loss of Black business revenue accounted for by these industries was greater between 1982 and 1992 than it was in the previous decade. Revenue share decreased from 23.0 percent to 14.9 percent between 1982 and 1992 (a 42.6 percent decrease)
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From page 199... ...
Current figures are an improvement over 1987, when the 424,165 Black-owned firms comprised 3.1 percent of all small firms and accounted for just 1 percent of all small business revenue, and the average gross revenue per Black business, $46,593, was exactly 25 percent of the gross revenue of businesses owned by nonminority men and 32 percent of the average revenue of all U.S. firms.
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From page 200... ...
. USBC compiles SMOBE, the data set most widely used to study minority-business trends, for businesses owned by Blacks, Hispanics, Asians, Pacific Islanders, Native Americans, Alaska Natives, and White women.
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From page 201... ...
In 1987 a second significant redefinition of the survey cohort occurred; USBC excluded regular corporations but maintained inclusion of 1120 S corporations. Thus, the 1987 and 1992 SMOBEs do not include information for regular corporations, the legal form of most incorporated Black businesses.
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From page 202... ...
Thus, removing regular corporations from the survey cohort reduced Black business revenue by 22.6 percent and reduced employment in Black-owned businesses by 26.8 percent. Other research indicates that employment and revenue may be understated by as much as 50 percent (Boston, 1995~.
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From page 203... ...
Black-owned regular corporations have an even larger average employment and revenue capacity. Since 1992, USBC has changed its survey methodology again to include subchapter regular corporations in the 1997 SMOBE.
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From page 204... ...
Government contracting was pivotal, especially given the difficulties encountered by minorities in gaining access to opportunities in the private sector. In 1964, Congress passed the Civil Rights Act authorizing the Attorney General to enforce the Fourteenth Amendment to the Constitution, adopted in 1868 to prevent states from denying equal protection to freed slaves.
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From page 205... ...
This was equivalent to 10 percent of the $77.8 billion in gross revenue received by all minority firms. In 1992, minority-owned firms received $11.7 billion in federal procurement, equivalent to 5.7 percent of minority business revenue for that year.
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From page 206... ...
The data, for 1982 through 1992 (Table 9-7) , included the number of firms, their combined total sales and combined total employment, the year an affirmative-action plan was initiated, 3This report lists all local programs created prior to the 1989 croson decision Discussed latery.
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From page 207... ...
Because 1987 SMOBE data do not include information for regular corporations, the more prevalent legal form of organization among affirmative-action programs, it is not possible to evaluate the impact of affirmative-action policies on changes in revenue and employment for these companies. Nevertheless, firms registered in these programs usually have much greater revenues and employment capacities.
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From page 208... ...
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From page 214... ...
Congress subsequently wrote affirmative-action provisions into the Surface Transportation Assistance Act of 1982, the Foreign Assistance Act of 1983 as well as its 1985 extension, and the Surface Transportation and Uniform Relocation Assistance Act of 1987. STRICT SCRUTINY BECOMES THE LEGAL STANDARD In April 1983, the Richmond, Virginia, City Council voted to enact an affirmative-action plan in contracting (National Cooperative Highway Research Program, 1992; Dixon, 1990; Stoelting, 1990; Rice, 1991~.
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From page 215... ...
The Supreme Court vacated the earlier decision and remanded the case back to the Fourth Circuit Court where the district court's decision was reversed; the Fourth Circuit Court ruled that the plan violated the equal protection clause of the Fourteenth Amendment because the city's plan did not conform to the "strict scrutiny standard" meaning that the "factual predicate" underlying racial preference programs must be supported by adequate and specific findings of past discrimination; generalized findings are not sufficient. The City of Richmond then appealed the Fourth Circuit Court's decision to the U.S.
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From page 216... ...
In an effort to ensure compliance with strict scrutiny standards, state and local governments also began to commission disparity studies. Unfortunately, the Supreme Court's decision left numerous questions unanswered regarding, specifically, what evidence is required to meet strict scrutiny standards; thus, the evidentiary standard is being redefined constantly.
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From page 217... ...
The difficulty in meeting the standard resides in the fact that the kind of evidence required has not been clarified. Oddly, the Supreme Court imposed the strict scrutiny standard in the Croson decision, but did not take the opportunity in the subsequent Adarand decision to clarify its specific evidentiary requirements.
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From page 218... ...
Now, if we add subchapter regular corporations, the total employment capacity of Black firms will be even greater. If current trends hold, approximately 80 percent, or 2.5 million, of the new jobs Black firms create will go to Blacks.
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From page 219... ...
Nevertheless, the possibility still exists. Objective research is needed to establish the criteria and the methodology for meeting the strict scrutiny standard.
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From page 220... ...
1990 The characteristics of business owners database. Journal of Human Resources 25~4~: 752-756.
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From page 221... ...
Unpublished report. National Cooperative Highway Research Program 1992 Minority and disadvantaged business enterprise requirements in public contracting.
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