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America Becoming: Racial Trends and Their Consequences, Volume II (2001)

Chapter: 9. Trends in Minority-Owned Businesses

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Suggested Citation:"9. Trends in Minority-Owned Businesses." National Research Council. 2001. America Becoming: Racial Trends and Their Consequences, Volume II. Washington, DC: The National Academies Press. doi: 10.17226/9719.
×

9
Trends in Minority-Owned Businesses

Thomas D.Boston

During the past quarter century, minority-owned businesses have undergone a significant transition. Small-scale, personal-service businesses—beauty salons, barber shops, etc. —no longer predominate; they have been replaced by businesses in a diverse array of industries from which Blacks had, heretofore, been excluded for reasons of education, experience, or race. Between 1960 and 1980, minority-owned, personal-service businesses decreased by 49.1 percent, while minority-owned finance, insurance, and real estate businesses increased by 185.7 percent; business services increased by 175 percent; and wholesale industries increased by 111.8 percent (Bates, 1987; see Table 9–1).

One factor that may have helped accelerate this trend, from the mid-1960s through the 1980s, was public-sector, affirmative-action programs in contracting and procurement. 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. Accelerating factors during the 1970s and 1980s were education and experience; Blacks were quickly gaining managerial and executive-level experience in the corporate sector, pursuing business degrees in greater numbers, and, in general, accumulating greater endowments of human-capital attributes closely associated with self-employment activities.

By the late 1980s and early 1990s, decreases in the percentage of personal-service establishments among Black-owned businesses bottomed

Suggested Citation:"9. Trends in Minority-Owned Businesses." National Research Council. 2001. America Becoming: Racial Trends and Their Consequences, Volume II. Washington, DC: The National Academies Press. doi: 10.17226/9719.
×

TABLE 9–1 Percentage of Minority Self-Employment in Various Industries, by Industry Group, 1960 and 1980

Industry

1960

1980

Percent Change

Construction

16.7

16.5

–1.2

Manufacturing

4.1

6.0

46.3

Transportation, communication, and utilities

3.9

6.0

53.8

Wholesale

1.7

3.6

111.8

Retail

25.4

25.4

0.0

Finance, insurance, and real estate

1.4

4.0

185.7

Business services

2.4

6.6

175.0

Repair services

5.2

6.9

32.7

Personal services

28.9

14.7

–49.1

Other services

10.3

10.3

0.0

Total

100.0

100.0

 

SOURCE: Bates (1987). Reprinted by permission.

out as the new generation of Black business owners emerged—younger, better educated, and with more managerial and supervisory experience. 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. These opportunities, in turn, expanded the diversification, revenue sources, and employment capacity of Black-owned businesses.

By the 1980s, obtaining public-sector contracting and procurement was a fundamental business strategy for a significant portion of successful minority business owners, because public-sector affirmative-action programs afforded minority entrepreneurs substantial growth and revenue opportunities. In 1987, Black-owned firms with revenues of $1,000,000 or more earned 12.8 percent of their gross revenue from the public sector, while nonminority male-owned businesses of a similar size earned only 6.1 percent of their revenue from such sources (U.S. Bureau of the Census, 1991:204); for firms with revenues between $500,000 and $999,999, percentages of revenue from the public sector were 9.3 percent for Black-owned and 5 percent for nonminority male-owned businesses.

In 1995, I mailed a survey to 1,412 businesses owned by ethnic minorities and White women located in the Atlanta metropolitan area to

Suggested Citation:"9. Trends in Minority-Owned Businesses." National Research Council. 2001. America Becoming: Racial Trends and Their Consequences, Volume II. Washington, DC: The National Academies Press. doi: 10.17226/9719.
×

determine the number and kinds of industries/businesses owned, and their sources of income (Boston, 1998). The survey population was drawn from databases maintained by public and private agencies in the Atlanta metropolitan area.1 Of the 1,412 surveys mailed, 316 responses were received (approximately 22 percent response rate), including 223 from Black-owned businesses.

Industries represented and percent of total sample were as follows: services, 40 percent; construction, 24 percent; wholesale,14 percent; manufacturing, 7 percent; transportation and communications, 5 percent; retail, 4 percent; finance, insurance, and real estate, 2 percent; and nonclassified industries, 2 percent. Among the firms in service industries, the largest concentrations were in computer and data processing followed by engineering and architecture, services to buildings, management and public relations, commercial printing, personnel supply, other business services, and advertising. Of the businesses responding to the survey, 71 percent were owned by Blacks; 14 percent, by White women; 7 percent, by Hispanics; 5 percent, by Asian and Pacific Islanders; and 1 percent, by Native Americans.

The survey results for Black-owned businesses revealed that 42.5 percent are located within the city limits of Atlanta. Among those businesses, in response to why they chose their present location, 25.4 percent gave cost considerations as the most important factor, 14.7 percent cited the need to be close to their customers and clients, 12.8 percent said convenience and accessibility was most important, and 12.6 percent said that they did so to be close to home. Among businesses located in the suburbs, 25.7 percent indicated they did so to be close to their customers and clients, 16.8 percent cited convenience and accessibility, 14.1 percent indicated cost considerations, and 9.8 percent indicated that they worked from a home office. In regard to employment, 45.7 percent of all workers employed by the Black-owned businesses lived in the city. Data also reveal that Black-owned businesses hired 21.5 percent of their workforce from low-income, inner-city neighborhoods. More precisely, 24.6 percent of employees in businesses located in the city lived in low-income, inner-city neighborhoods, and 19.2 percent in suburban businesses were from low-income neighborhoods. 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

1  

The 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.

Suggested Citation:"9. Trends in Minority-Owned Businesses." National Research Council. 2001. America Becoming: Racial Trends and Their Consequences, Volume II. Washington, DC: The National Academies Press. doi: 10.17226/9719.
×

percent of employees in Black-owned businesses located in the suburbs were Black.

The survey also revealed a significant reliance on government contracting. In 1995, in particular, the mean percentage of revenue derived from the government sector, for all groups, was 31.5 percent. Of that, the highest amount, 34.4 percent, went to Black-owned businesses; and the lowest amount, 19.1 percent, went to businesses owned by White women (Table 9–2). Dependence on the government as a source of revenue varied considerably by industry. For example, 50.9 percent of the gross revenue of construction firms came from the public sector, whereas public-sector revenue totaled 11.5 percent for manufacturing (Table 9–3).

Minority participants in the city of Atlanta’s minority business programs are among the most successful in the metropolitan area. In 1993, the average revenue of 770 Black-owned businesses participating in the City of Atlanta and Fulton County’s program was $606,208.00; in contrast, the U.S. Bureau of the Census (USBC) (1996) indicates that the average revenue of all 23,488 Black-owned businesses in the Atlanta metropolitan area, in 1992, was $44,668.00.

MAJOR IMPROVEMENTS FROM THE PAST

Aldrich and Waldinger (1990) assert that minority business success is built on the interaction between opportunity structures and group char-

TABLE 9–2 Mean Percentage of Minority-Owned Revenue from the Government Sector, by Group, 1995 Survey

Minority Group

Mean Percent

Respondents to Question

Number of Respondents to Survey

Percent of 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. Survey conducted by Thomas D.Boston.

aNot determined.

Suggested Citation:"9. Trends in Minority-Owned Businesses." National Research Council. 2001. America Becoming: Racial Trends and Their Consequences, Volume II. Washington, DC: The National Academies Press. doi: 10.17226/9719.
×

TABLE 9–3 Mean Percentage of Minority-Owned Business Revenue from the Government Sector by Industry, 1995 Survey

Industry

Mean Percent

Number of Respondents to Survey

Percent of Survey Respondents

Agriculture

0.0

2

0.6

Construction

50.9

52

16.5

Manufacturing

11.5

13

4.1

Transportation, communication, utilities

20.6

18

5.7

Wholesale

27.0

35

11.1

Finance, insurance, real estate

24.9

14

4.4

Retail

35.0

18

5.7

Consumer services, repair, health

32.4

42

13.3

Business services, law, computer

28.2

111

35.1

Other

29.2

11

3.5

Total

31.5

316

100

Note: Ownership lists based on businesses registered with seven public agencies in Metropolitan Atlanta, Georgia. Survey conducted by Thomas D.Boston.

acteristics. Opportunity structures include favorable market conditions, the ability to provide products and services beyond those aimed at specifically ethnic markets, and the ease of access to business opportunities, competitive environments, and government policies. Group characteristics include selective migration, culture, aspirations, ethnic and social networks, organizing capabilities, ability to mobilize resources, and the extent to which government facilitates or constrains resource acquisition by/for the group. During the 1960s, these conditions were not favorable for minority entrepreneurs, especially Blacks; but as conditions improved, so did the aggregate characteristics of minority-owned businesses.

In 1960, few Blacks occupied the kinds of managerial, administrative, and technical jobs in the corporate sector that typically equip employees with the experience needed to become successful entrepreneurs. 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. In addition, 48 percent of nonminority male business owners had close relatives who were business

Suggested Citation:"9. Trends in Minority-Owned Businesses." National Research Council. 2001. America Becoming: Racial Trends and Their Consequences, Volume II. Washington, DC: The National Academies Press. doi: 10.17226/9719.
×

owners or were self-employed; this was true for only 27.8 percent of Black business owners (U.S. Bureau of the Census, 1991:50, 58).

During the 1960s, Blacks were excluded from the nation’s prestigious country clubs and business associations—i.e., places where networking and important deal making occur. Blacks were educated in second-rate schools, confined mainly to segregated neighborhoods, and constituted a disproportionate percentage of low-wage, low-skill workers. As a result, Blacks’ access to capital, credit, and business opportunities was lower compared to Whites. This deficit directly affected the types of businesses Blacks were able to start and operate.

During the time that segregation was legal, it was not uncommon for Blacks to encounter racial barriers even when they attempted to service Black consumers. This was particularly true in certain industries outside of personal service and retail. T.M.Alexander, Georgia’s first Black licensed insurance agent, recounted how segregation created both legal and psychological barriers between Black entrepreneurs and Black consumers (Alexander, 1992:66).

For many years, Blacks had been shrewdly taught to place their confidence in Whites and to look with doubt and suspicion upon their own race. This was a sad but true fact of life that hampered many Black companies. My White competitors would stress the unavoidable failures of Black business in an effort to capture the Black market. White salesmen of all kinds could enter large numbers of Black homes with little sales resistance. I could not. Ironically, the White agents would enter Black homes without the usual courtesy one would expect essential to good salesmanship.

Coleman and Cook observed (1976:46):

It is not unreasonable to assume that during the nineteenth century and until the 1960s, prospective Black businessmen were rather reluctant to start a business beyond the “mom-and-pop” variety. For indeed, any large-scale enterprise would have been, in all probability, dependent in some way upon White suppliers and/or White consumers either or both of which would have probably proved hostile. 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), eating and drinking establishments (7.6 percent), personal-service establishments (18.5 percent), and auto repair/garages (2.9 percent) (Table 9–4), typically thought of as “mom and pop” enterprises. In 1972, average revenue of the 34,693 personal-service establishments was only $9,223. The average for businesses

Suggested Citation:"9. Trends in Minority-Owned Businesses." National Research Council. 2001. America Becoming: Racial Trends and Their Consequences, Volume II. Washington, DC: The National Academies Press. doi: 10.17226/9719.
×

TABLE 9–4 Characteristics of Black-Owned Businesses in Selected Industries, 1972 to 1992

Characteristic

1972

1977

1982

Percent Change 1972 to 1982

Total Black-owned firms

187,602

231,203

339,239

80.8%

Receipts of Black-owned firms $ (000), Total

$5,534,000

$8,645,000

$12,444,000

124.9%

Number of Black-Owned Firms in Selected Industries

66,273

65,620

68,688

3.6%

Food stores

11,887

10,679

9,187

–22.7%

Eating and drinking

14,346

13,008

11,629

–18.9%

Personal service

34,693

35,035

40,394

16.4%

Auto repair and garages

5,347

6,898

7,478

39.9%

Percent of All Black-Owned Firms

35.3%

28.4%

20.2%

–42.7%

Food stores

6.3%

4.6%

2.7%

–57.3%

Eating and drinking

7.6%

5.6%

3.4%

–55.2%

Personal service

18.5%

15.2%

11.9%

–35.6%

Auto repair and garages

2.9%

3.0%

2.2%

–22.7%

Receipts of Black-Owned Firms in Selected Industries

$1,432,805

$1,941,936

$2,349,686

64.0%

Food stores

$570,572

$785,776

$882,737

54.7%

Eating and drinking

$437,088

$572,331

$675,230

54.5%

Personal service

$320,125

$399,274

$560,809

75.2%

Auto repair and garages

$105,020

$184,555

$230,910

119.9%

Percent of All Receipts in Black-Owned Firms

25.9%

22.5%

18.9%

–27.1%

Food stores

10.3%

9.1%

7.1%

–31.2%

Eating and drinking

7.9%

6.6%

5.4%

–31.3%

Personal service

5.8%

4.6%

4.5%

–22.1%

Auto repair and garages

1.9%

2.1%

1.9%

–2.2%

Average Revenue of Black Firms

All black firms

$29,499

 

Selected firms

$21,620

Food stores

$48,000

Eating and drinking

$30,468

Personal service

$9,227

Auto repair and garages

$19,641

aData adjusted by the U.S. Census Bureau to exclude 1120C corporations (Internal Revenue Service Tax Form 1120C).

Suggested Citation:"9. Trends in Minority-Owned Businesses." National Research Council. 2001. America Becoming: Racial Trends and Their Consequences, Volume II. Washington, DC: The National Academies Press. doi: 10.17226/9719.
×

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

Suggested Citation:"9. Trends in Minority-Owned Businesses." National Research Council. 2001. America Becoming: Racial Trends and Their Consequences, Volume II. Washington, DC: The National Academies Press. doi: 10.17226/9719.
×

in all four industries was $21,620, compared to $29,499 for all Black-owned businesses.

Between 1972 and 1982, the industry composition of Black-owned businesses changed significantly. Although the total number of Black-owned businesses increased by 80.8 percent, and Black-business revenues increased by 124.9 percent, the number of businesses in the four predominant industries increased by only 39.9 percent, and their total revenue increased by only 64 percent. As a result, the share of all Black-owned businesses decreased from 35.3 percent to 20.2 percent (a 42.7 percent decrease), and their share of business revenue decreased from 25.9 percent to 18.9 percent (a 27.1 percent decrease). The share of food stores decreased by 57.3 percent; eating and drinking establishments, by 55.2 percent; personal-service establishments, by 35.6 percent; and auto repair/garages, by 22.7 percent. Similarly the share of revenues accounted for by both food stores and eating and drinking establishments decreased by 31 percent, personal-service establishments, by 22.1 percent; and auto repair/garages, by 2.2 percent.

Between 1982 and 1992, the number of Black-owned personal-service and retail establishments continued to fall, but not as dramatically as in the previous decade. Black-owned businesses comprising the four predominant industries decreased from 21.5 percent in 1982 to 18.4 percent in 1992 (a 14.6 percent decrease). During the previous 10 years, their industry share decreased by 42.7 percent. 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), compared to 27.1 percent the previous decade.

The changing character of Black-owned businesses mirrored changes in the Black population. Desegregation and affirmative-action policies in higher education allowed a significant increase in the proportion of Blacks who attained business and engineering degrees. Bates (1997:9) reports that between 1976 and 1992, the number of Blacks receiving education degrees decreased by 63.2 percent (from 14,209 to 5,226); in contrast, the number receiving business degrees increased by 92.9 percent (from 9,489 to 18,304); and the number receiving engineering degrees increased by 161.3 percent (from 1,370 to 3,580). At the same time, major corporations initiated affirmative-action policies to recruit more minorities into managerial and professional positions.

Coupled with the decline of urban infrastructures and the enactment of open housing policies, a growing number of middle- and upper-income Blacks moved to the suburbs. At the same time, major chain stores and franchises (e.g., fast-food chains, convenience stores, drug stores, commercial dry cleaners, one-stop gas stations, etc.) moved into Black

Suggested Citation:"9. Trends in Minority-Owned Businesses." National Research Council. 2001. America Becoming: Racial Trends and Their Consequences, Volume II. Washington, DC: The National Academies Press. doi: 10.17226/9719.
×

urban communities and captured consumer markets that heretofore were the exclusive domain of Black business owners. Thus, traditional Black-owned businesses lost their “protected” markets to population dispersion and stiffer competition from non-Black businesses.

As minority-owned businesses diversified, more minorities also entered the business arena. Between 1987 and 1992, Hispanic-owned businesses had the highest rate of increase at 82.7 percent (from 422,373 to 771,708), while businesses owned by minorities other than Blacks and Hispanics increased 61.0 percent (from 376,711 to 606,426); and businesses owned by Blacks increased 46.4 percent (from 424,165 to 620,912). In total, minority-owned businesses increased by 63.4 percent, whereas businesses owned by nonminority males increased by only 26.9 percent during the same period. In 1987 the ratio of nonminority male-owned businesses to minority-owned businesses was 7.16:1; in 1992, 5.56:1 (U.S. Bureau of the Census, 1991, 1997).

Between 1982 and 1992, the number of Black-owned businesses grew at a rate of 7.25 percent annually—twice the growth rate of all small businesses. In addition, the employment capacity of Black-owned businesses grew at 11.02 percent annually. Because of this, the 620,912 Black-owned firms in 1992 had an employment capacity equal to 2.3 percent of the Black workforce.

LOTS OF ROOM FOR IMPROVEMENTS YET TO COME

Although minority-owned businesses have experienced high growth rates, they still account for only 11.4 percent of all small businesses in the United States and only 6.1 percent of small business revenue. In contrast, businesses owned by nonminority males constitute 58.6 percent of all small businesses and 76.0 percent of small business revenue. 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. Blacks also had smaller annual revenues than Hispanics ($58,555) and other minorities ($93,222). By 1992, there had been some marginal growth; the 621,912 Black-owned firms comprised 3.6 percent of all small businesses, but their gross revenue was still only 1 percent of all small business revenue. Average 1992 revenues ranged from $249,800 for nonminority male-owned firms; $192,680 for all small businesses; $94,400 for Hispanic-owned businesses; $164,400 for businesses owned by other minorities; and $51,855 for Black-owned firms.

The relative disparity for Blacks was wider than other minorities in a

Suggested Citation:"9. Trends in Minority-Owned Businesses." National Research Council. 2001. America Becoming: Racial Trends and Their Consequences, Volume II. Washington, DC: The National Academies Press. doi: 10.17226/9719.
×

number of key areas. For example, in 1996, only 60.1 percent of Blacks still owned the business they owned in 1992, whereas the average for all the other groups was 68.9 percent. The next lowest percentage was women-owned businesses at 66 percent; the highest was nonminority males at 70.5 percent. In regard to the reason for the change in ownership, 26.0 percent of Blacks indicated that their business no longer existed, as opposed to being sold or transferred to another owner; overall, 18.3 percent of ex-owners cited this as the reason. Further, 20.7 percent of Blacks indicated that their business was unsuccessful at the time it was discontinued, compared to 14.1 percent of all ex-owners. Finally, 23.9 percent of Black ex-owners indicated that the reason their business was unsuccessful was because they lacked access to business or personal loans or credit, whereas only 11.5 percent of all ex-owners cited this as a reason. The differential rate of Black business terminations and the reasons given for it are signs that Blacks continue to encounter problems not experienced by Whites or other minorities. Finally, although 44.5 percent of all small businesses earned $10,000 or less in 1992, this was true for 46.6 percent of Hispanic-owned businesses, 35.1 percent of businesses owned by other minorities, 38.5 percent of businesses owned by nonminority males, and 56.1 percent of businesses owned by Blacks (U.S. Bureau of the Census, 1991, 1997).

STRENGTHS AND WEAKNESSES OF DATA AVAILABLE FOR DESCRIBING TRENDS

Trends noted above are based on two data sets—the Survey of Minority-Owned Business Enterprises (SMOBE) and the Characteristics of Business Owners (CBO). 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. The data are compiled from income tax returns and surveys, and include industry type, size of firm, number of firms, legal form of organization, gross receipts, number of paid employees, annual payroll, and geographic location. The first survey was conducted in 1969; since 1977, it has been conducted every five years. Income tax data are derived from any of three Internal Revenue Service business tax forms— 1040 Schedule C (sole proprietorship, i.e., unincorporated business or self-employed person), 1065 (partnership), or 1120 or 1120 S2 corporation.

2  

An 1120 S corporation is an IRS designation for legally incorporated businesses with 35 or fewer shareholders. One advantage of the S corporation is that its shareholders do not face the double tax liability encountered by shareholders of regular corporations for whom

Suggested Citation:"9. Trends in Minority-Owned Businesses." National Research Council. 2001. America Becoming: Racial Trends and Their Consequences, Volume II. Washington, DC: The National Academies Press. doi: 10.17226/9719.
×

Social Security numbers from the forms are forwarded to the Social Security Administration, which supplies the race of the owners for sole proprietorship and for the majority of owners for partnerships and S corporations. SMOBE is widely accessible and reliable for areas with large numbers of minority firms. Reliability estimates for sampling errors are provided with the reports, and measures are also taken to reduce non-sampling errors. The disadvantage of the data is that, over time, USBC has redefined criteria for inclusion in, and methodology of, the survey.

These changes complicate comparison of older and newer surveys, as do other changes, including the way in which various minority groups have been disaggregated; the Standard Industrial Classification used to categorize firms by industries; the enumeration of establishments of a firm, as opposed to the entire firm; the business-receipt threshold used as a benchmark to include or exclude firms; and the incorporation status of firms—i.e., 1120 S or regular corporations.

Prior to 1982, a self-identified minority person had only to file one of the business tax returns noted above to be counted in the survey cohort. Since 1982, only businesses with gross receipts of $500.00 or more were included. Based on past history, it is safe to assume that Black businesses are disproportionately concentrated among businesses earning less than $500 in revenue; that being the case, the size of the decrease of Black businesses, specifically personal-service businesses (as noted in Table 9–4) is likely overstated simply because of the change in the revenue threshold.

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. Because of this, census data significantly understate total employment and revenue in small businesses. When the change was made in 1987, the survey results for 1982 were retabulated using the 1987 methodology, excluding regular corporations; hence, survey results exist for 1982 data both with and without regular corporations. Before regular corporations were dropped from the 1982 survey, total revenue for Black-owned firms was $12.4 billion, and total employment was 165,765; after regular corporations were dropped, total revenue was $9.6 billion and

   

both corporate earnings and dividends are taxed. All earnings of the S corporation are distributed to the shareholders and treated as individual income. Apart from the restric-tion on the number of shareholders, S corporations are prohibited from operating in finan-cial service industries and international markets and they cannot be held by or hold other companies. For tax purposes, these corporations are treated as individuals.

Suggested Citation:"9. Trends in Minority-Owned Businesses." National Research Council. 2001. America Becoming: Racial Trends and Their Consequences, Volume II. Washington, DC: The National Academies Press. doi: 10.17226/9719.
×

TABLE 9–5 Number and Percentages of Minority-Owned Firms by Legal Form of Organization, 1995 Survey

 

Black

American Indian/ Alaska Native

Asian American/ Pacific Islander

Legal Form of Organization

No. of Firms

Percent of Total

No. of Firms

Percent of Total

No. of Firms

Percent of Total

Proprietorship

51

22.9

 

 

1

5.9

Partnership

7

3.1

 

 

 

 

Subchapter S Corporation

61

27.4

 

 

8

47.1

Regular Corporation

99

44.4

3

100

8

47.1

Franchise

5

2.2

 

 

 

 

Total

223

100

3

100

17

100

Note: Ownership lists based on businesses registered with seven public agencies in Metropolitan Atlanta, Georgia. Survey conducted by Thomas D.Boston.

total employment was 121,373. 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).

Using survey data from Atlanta, as viewed in Table 9–5, the significance of omitting regular corporations is clear: 99 of the 160 Black-owned corporations are regular corporations. For the survey as a whole, 137 of the 232 corporations are regular corporations. In fact, 57.9 percent of all businesses certified to participate in Atlanta’s and Fulton County’s affirmative-action programs are corporations; 72.6 percent of these are regular corporations. This same trend prevails in other minority business programs across the country.

Table 9–6 indicates the mean and median employment in firms according to their legal form of organization. Although the mean employment in regular and S corporations is similar, the median employment in regular corporations is greater—S corporations employed 2,062 workers, regular corporations employed 2,859 workers.

The 1992 SMOBE survey cohort included businesses filing 1040 C, 1065, and 1120 S forms in that year. According to the 1992 SMOBE, Black-

Suggested Citation:"9. Trends in Minority-Owned Businesses." National Research Council. 2001. America Becoming: Racial Trends and Their Consequences, Volume II. Washington, DC: The National Academies Press. doi: 10.17226/9719.
×

Hispanic American

White Women

Ethnicity Unclassified

Group Total

No. of Firms

Percent of Total

No. of Firms

Percent of Total

No. of Firms

Percent of Total

No. of Firms

Percent of Total

1

4.8

14

31.1

3

42.9

70

22.2

2

9.5

 

 

 

 

9

2.8

9

42.9

13

28.9

4

57.1

95

30.1

9

42.9

18

40.0

 

 

137

43.4

 

 

 

 

 

 

5

1.6

21

100

45

100

7

100

316

100

owned S Corporations comprised just 4 percent of all Black-owned businesses but accounted for 38 percent of all business revenue and 51 percent of all employees in Black-owned firms. 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.

CBO is similar to SMOBE, but has the added advantage of providing information about the characteristics of businesses—age of the business, capital invested, net income, current assets, markets, and survival—and personal information about the owners—age, education, experience, marital status, and gender. CBO has been published every five years since 1982. Its disadvantages as a data source center primarily on the lack of accessibility of the data and the inconsistency in survey methodology between survey periods (see Nucci, 1992; Bates, 1990, 1991).

Bates (1997), Farlie and Meyer (1996), Borjas and Bronars (1989), and Evans and Leighton (1989) examined minority-owned business trends by using self-employment data from population censuses; however, these data are of limited use because they lack employment and revenue information about businesses (Bates, 1997:3).

Suggested Citation:"9. Trends in Minority-Owned Businesses." National Research Council. 2001. America Becoming: Racial Trends and Their Consequences, Volume II. Washington, DC: The National Academies Press. doi: 10.17226/9719.
×

TABLE 9–6 Mean and Median Employment by Legal Form of Organization, 1995 Survey

Legal Form of Organization

Number of Firms

Mean

Median

Total

Proprietorship

70

3.89

3

249

Partnership

9

46.44

7

418

Subchapter S Corp

95

22.41

7

2,062

Regular Corp

137

22.16

10

2,859

Franchise

5

31.60

30

158

Total

316

19.22

7

5,746

Note: Ownership lists based on businesses registered with seven public agencies in Metropolitan Atlanta, Georgia. Survey conducted by Thomas D.Boston.

PUBLIC POLICIES THAT WORKED

As noted earlier, a fundamental element in the industry diversification and growing capacity of minority-owned businesses is their access to local, state, and federal procurement opportunities. 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. Titles II and III of the Civil Rights Act prohibited discrimination in public accommodations; Title IV authorized implementation of the 1954 U.S. Supreme Court decision, Brown v. Board of Education, which outlawed segregation in public schools.

In 1965, President Lyndon Johnson issued Executive Order 11246 (amended in 1976 by Executive Order 11375), which obligated recipients of federal contracts in excess of $50,000 to file written affirmative-action plans, not to discriminate in employment, and to undertake steps to recruit and upgrade their employment of minorities and women. The U.S. Department of Labor was empowered to enforce the Order and to impose penalties for noncompliance. The Economic Opportunity Act of 1964 directed the Small Business Administration (SBA) to assist small businesses owned by low-income individuals. In 1967, the federal government amended this Act and provided the first statutory assistance to minority-owned small businesses.

In March of 1969, President Richard Nixon issued Executive Order 11458, which outlined arrangements for developing and coordinating a national program for minority businesses. The order did not prescribe

Suggested Citation:"9. Trends in Minority-Owned Businesses." National Research Council. 2001. America Becoming: Racial Trends and Their Consequences, Volume II. Washington, DC: The National Academies Press. doi: 10.17226/9719.
×

specific goals, but directed the Secretary of Commerce to develop and coordinate activities at the federal, state, and local levels aimed at promoting minority business development. The head of each federal department, or a designated representative, was responsible for submitting reports to the Commerce Secretary about the department’s budget, plans, and programs to assist minority businesses. These activities led to the establishment of the Office of Minority Business Enterprise.

To increase awards of federal contracts to minority businesses, Section 8(a) of the Small Business Act was enacted to authorize SBA to enter into contracts with federal agencies and, in turn, award these contracts to small businesses. Section 8(a) became one of the primary means of increasing the use of minorities in federal procurement. In fiscal year 1969, $8.9 million was awarded under the 8(a) program; in 1971, $64.5 million; and in 1973, $208 million. Between 1968 and 1977, $2.2 billion was awarded under this program (Walker, 1986).

The Public Works Employment Act of 1977 (Public Law 95–28; 91 Stat. 117) and the 1978 Omnibus Small Business Act (Public Law 95–507[92 Stat. 1757]) established percentage goals in procurement for minority-owned firms for the first time, requiring at least 10 percent of all federal grants for local public-works projects to be expended to minority businesses. The two Acts also directed the Secretary of Commerce, in coop-eration with federal departments and agencies, to develop comprehensive minority-enterprise programs and institute specific goals for minority firms in federal procurement. Monitoring and evaluation procedures were established to assess performance against these goals. A new subcontracting program was introduced under section 8(d) of the Small Business Act that required recipients of federal contracts exceeding $1 million for the construction of a public facility to establish percentage goals for the use of minority subcontractors. In 1981, minority-owned firms received 3.4 percent of all federal procurement expenditures. In 1987, total federal procurement with minorities was $7.5 billion. 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. In 1994 they received $14.4 billion (8.3 percent) of federal procurement; and in 1995, $11.2 billion (5.5 percent) (Clayton, 1996:75).

Until 1980, the federal government made the biggest push of all governmental agencies for minority business inclusion. In contrast, little or nothing was happening in the private sector or at state and local government levels. This changed when Mayor Maynard Jackson pushed the city of Atlanta to adopt an aggressive minority-business affirmative-action plan.

Suggested Citation:"9. Trends in Minority-Owned Businesses." National Research Council. 2001. America Becoming: Racial Trends and Their Consequences, Volume II. Washington, DC: The National Academies Press. doi: 10.17226/9719.
×

Mayor Jackson’s affirmative-action initiative grew out of the 1974 “Atlanta Plan,” designed in response to Presidential Executive Order 11246 and intended to ensure equal employment opportunity in all city activities. In 1975, Jackson extended the scope of the plan by issuing an administrative order mandating the use of minority contractors on the construction of the proposed Hartsfield International Airport as a means to achieve the goals of Title VII. Opposition to the plan was intense because the airport was one the largest capital construction projects in the South at the time. In 1976, the Atlanta City Council formally adopted a resolution mandating that 25 percent of the funds expended on the design and construction of the new airport go to minorities as joint-venture partners, prime contractors, or subcontractors. Soon afterward, this minority business initiative was extended by an executive order to cover all city contracting.

Minority business utilization by the city of Atlanta increased substantially following the implementation of the Plan. According to the Annual Reports of the Office of Contract Compliance of the City of Atlanta, total minority procurement was 0.13 percent in 1973, 3 percent in 1974, 14.3 percent in 1975, 19.9 percent in 1976, and 24.1 percent in 1977. By 1978, the end of Jackson’s first term, the city boasted of having achieved 38.5 percent minority participation. The Annual Reports show that during Mayor Jackson’s term in office, which began in 1974, minority procurement increased significantly; however, actual percentages were less than those claimed made by the city (Boston, 1996). In an independent examination of contracts awarded between 1979 and 1989, it was determined that ethnic minorities and White women, representing 359 firms, received $191 million (15.5 percent) of all dollars awarded, including 11.4 percent of all prime contracts, 17.5 percent of all subcontracts, and 27.6 percent of all joint ventures. An examination of bid activity indicates that Blacks submitted 29 percent of all construction bids during this period (Boston, 1996). During the 1980s, dozens of cities followed Atlanta’s lead. By the mid-1980s, more than 200 local and state programs existed nationwide (Minority Business Enterprise Legal Defense and Education Fund, 1988).3 Most, at the local level, were patterned after Atlanta’s program.

Boston (1998) recorded information about cities with at least 200 Black-owned businesses in 1982. 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,

3  

This report lists all local programs created prior to the 1989 Croson decision (discussed later). It also gives the legislative authority creating them, the general category of purchasing activity they were designed to cover, and the percentage goal for the program.

Suggested Citation:"9. Trends in Minority-Owned Businesses." National Research Council. 2001. America Becoming: Racial Trends and Their Consequences, Volume II. Washington, DC: The National Academies Press. doi: 10.17226/9719.
×

if one was, prior to 1987,4 industries covered by the plan, percentage goal of the plan, and changes in the number of businesses over time. Of these 88 cities, 76 percent implemented affirmative-action plans prior to 1987. Although the growth rate is greater in cities with affirmative-action programs than in cities without programs, the difference, about 5 percent, is not statistically significant.

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.

PUBLIC POLICIES THAT NEED TO BE IMPROVED

Given the role affirmative-action programs play in the changing character of minority-owned businesses, public policies are needed to clear up the ambiguity surrounding the “strict scrutiny” standard being used to dismantle these programs. In 1977, the Public Works Employment Act mandated that 10 percent of federal funds appropriated for local public-works projects must be used by state and local grantees to procure services or supplies from minority businesses. Soon after the Act was passed, H.Earl Fullilove, and several associations of construction contractors, challenged its constitutionality,5 and their case became the first legal challenge to a federal set-aside program to reach the Supreme Court. The suit alleged that Fullilove and others incurred injury because of the enforcement of the minority business requirement. They argued that the requirement violated the Equal Protection Clause of the Fourteenth Amendment and the Due Process Clause of the Fifth Amendment.

On July 2, 1980, a plurality of U.S. Supreme Court justices found the program to be constitutional, allowing federal departments and agencies as well as state and local agencies to operate minority business programs, and by 1988 there were programs at 190 local governmental agencies and 36 state agencies. Justice Burger, writing the plurality opinion, concluded that Congress need not establish specific findings of discrimination because it has the broad authority as well as the affirmative duty to react to

4  

The cut-off at 1987 is used because it predates the 1989 U.S. Supreme Court decision in the case of the City of Richmond v. J.A.Croson Co. Following the Croson decision, numerous programs were disbanded. The details of this decision are discussed later in this paper.

5  

H.Earl Fullilove, et al, Petitioners, v. Philip M.Klutznick, Secretary of Commerce of the United States, et al No. 78–1007, 448 U.S. 448, 65 L.Ed.2nd 902.

Suggested Citation:"9. Trends in Minority-Owned Businesses." National Research Council. 2001. America Becoming: Racial Trends and Their Consequences, Volume II. Washington, DC: The National Academies Press. doi: 10.17226/9719.
×

TABLE 9–7 Statistics for Black-Owned Businesses in Cities, 1982 to 1992

City

State

Number of Firms, 1982

Number of Firms, 1987

Number of Firms, 1992

Total Sales, 1982 (000)

Total Sales, 1987 (000)

Total Sales, 1992 (000)

Total Employ ment1982

Total Employment 1987

Total Employment 1992

Date Affirmative Action Plan Initiated

AKRON

OH

628

679

940

10,556

14,034

20,922

164

140

312

1984

ANCHORAGE

AK

312

347

518

11,907

11,334

32,321

217

161

832

1984

ATLANTA

GA

3,496

3,869

5,762

238,549

290,702

280,701

4,162

3,230

3,299

1982

AUGUSTA

GA

294

272

391

18,518

12,326

12,736

472

187

343

1982

AUSTIN

TX

815

1,111

1,579

19,704

31,689

45,026

397

731

871

1982

BALTIMORE

MD

4,077

5,044

7,542

241,024

165,350

233,164

2,411

1,898

2,409

1982

BATON ROUGE

LA

1,177

1,196

1,791

45,022

56,261

67,623

700

629

680

1986

BIRMINGHAM

AL

1,145

1,437

2,105

47,107

48,281

77,364

892

778

1,103

1980

BOSTON

MA

1,214

1,860

2,583

59,224

86,220

182,525

------------

928

------------

1987

BUFFALO

NY

717

735

1,011

25,993

31,484

36,321

697

345

639

---------

CAMDEN

NJ

264

270

356

5,771

9,103

28,514

41

116

906

1983

CHARLESTON

SC

490

456

703

14,838

15,825

26,251

218

234

629

1979

CHARLOTTE

NC

1,308

1,880

3,216

48,470

75,885

123,654

576

945

951

1983

CHATTANOOGA

TN

485

584

793

17,712

16,110

23,502

-------------

211

519

----------

CINCINNATI

OH

1,636

1,753

2,431

45,389

58,008

94,881

642

901

1,166

1983

CLEVELAND

OH

2,407

2,359

2,943

131,494

107,098

125,170

1,492

1,516

1,247

1984

COLUMBIA

SC

629

743

1,225

16,104

41,016

---------

259

622

---------

1986

COLUMBUS

GA

618

866

1,255

16,151

43,707

98,384

257

1,115

922

1984

COLUMBUS

OH

1,906

2,301

3,314

37,419

64,996

188,630

604

1,074

2,265

1983

DALLAS

TX

4,883

5,633

7,071

134,357

157,962

330,354

1,875

1,992

5,191

 

DAYTON

OH

908

879

1,122

20,123

33,134

31,716

336

644

432

1987

DENVER

CO

1,325

1,383

1,916

53,076

52,155

121,622

664

438

1,636

----------

DETROIT

MI

6,798

7,116

9,275

272,405

258,375

486,092

2,877

3,861

4,528

---------

DURHAM

NC

693

936

1,589

69,929

27,506

43,805

1,808

512

649

1984

EAST ORANGE

NJ

659

938

1,132

21,386

26,470

35,936

227

168

336

1982

EL PASO

TX

266

305

503

8,308

19,632

16,570

------------

814

210

1985

EVANSTON

IL

337

451

679

6,963

13,120

43,182

81

99

578

1973

FLINT

MI

634

683

960

26,481

21,018

22,309

218

230

259

---------

FORT LAUDERDALE

FL

472

620

643

12,201

34,337

26,200

194

365

267

1986

FORT WAYNE

IN

293

350

544

9,445

22,584

25,177

197

381

---------

1984

FRESNO

CA

306

359

486

9,377

14,403

21,725

133

191

274

1986

GARDENA

CA

322

316

488

6,905

10,534

31,940

65

70

187

1984

GARY

IN

1,103

1,051

1,274

49,005

77,456

84,777

171

894

854

--------

Suggested Citation:"9. Trends in Minority-Owned Businesses." National Research Council. 2001. America Becoming: Racial Trends and Their Consequences, Volume II. Washington, DC: The National Academies Press. doi: 10.17226/9719.
×

City

Affirmative Action Plan Coverage

Percent Goal of Plan

Percent Change In the No. of Businesses 1982– 92

Percent Change in the No. of Businesses 1987– 92

AKRON

Construction

15%

50%

38%

ANCHORAGE

Construction

10%

66%

49%

ATLANTA

Goods and Services

25%

65%

49%

AUGUSTA

No Plan

 

33%

44%

AUSTIN

Construction

8%

94%

42%

BALTIMORE

Construction Contracts

25%

85%

50%

BATON ROUGE

Construction

10%

52%

50%

BIRMINGHAM

Procurement

13%

84%

46%

BOSTON

Goods and Services

23%

113%

39%

BUFFALO

Construction

10%

41%

38%

CAMDEN

No Plan

 

35%

32%

CHARLESTON

No Plan

 

43%

54%

CHARLOTTE

Construction Grants

10%

146%

71%

CHATTANOOGA

Construction Grants

12%

64%

36%

CINCINNATI

Construction

15%

49%

39%

CLEVELAND

Construction

30%

22%

25%

COLUMBIA

No Plan

 

95%

65%

COLUMBUS

Procurement

4%

103%

45%

COLUMBUS

Construction Contracts

10%

74%

44%

DALLAS

No Plan

 

45%

26%

DAYTON

Construction Contracts

20%

24%

28%

DENVER

Construction Contracts

20%

45%

39%

DETROIT

No Plan

 

36%

30%

DURHAM

Services Construction

28%

129%

70%

EAST ORANGE

Construction Contracts

25%

72%

21%

EL PASO

Construction

20%

89%

65%

EVANSTON

No Plan

 

101%

51%

FLINT

Construction Contracts

18%

51%

41%

FORT LAUDERDALE

No Plan

 

36%

4%

FORT WAYNE

Procurement

10%

86%

55%

FRESNO

Construction

25%

59%

35%

GARDENA

Procurement

10%

52%

54%

GARY

No Plan

 

16%

21%

Suggested Citation:"9. Trends in Minority-Owned Businesses." National Research Council. 2001. America Becoming: Racial Trends and Their Consequences, Volume II. Washington, DC: The National Academies Press. doi: 10.17226/9719.
×

City

State

Number of Firms, 1982

Number of Firms, 1987

Number of Firms, 1992

Total Sales, 1982 (000)

Total Sales, 1987 (000)

Total Sales, 1992 (000)

Total Employment 1982

Total Employment 1987

Total Employment 1992

Date Affirmative Action Plan Initiated

GRAND RAPIDS

MI

252

312

494

7,419

13,719

16,594

84

107

144

1982

GREENSBORO

NC

897

1,094

1,617

22,460

30,751

45,201

312

461

915

----------

HAMPTON

VA

660

936

1,179

17,110

61,310

22,729

189

531

353

1985

HARRISBURG

PA

258

328

384

7,193

12,817

10,541

96

232

144

1982

HARTFORD

CT

436

526

751

23,570

32,758

26,551

236

480

218

1983

HOUSTON

TX

10,019

10,025

13,592

283,724

288,897

537,490

2,470

2,561

6,191

 

JACKSON

MS

1,251

1,738

2,560

38,093

71,603

93,616

593

1,235

1,623

1985

JACKSONVILLE

FL

1,703

1,967

2,507

53,755

80,913

112,765

1,031

1,156

1,710

1984

KANSAS CITY

KS

601

670

778

28,776

29,239

19,688

246

775

-----------

----------

KANSAS CITY

MO

1,552

1,812

2,243

60,594

78,673

84,997

767

1,568

1,565

---------

LAKE CHARLES

LA

416

490

644

10,780

13,876

16,124

168

185

----------

1980

LOS ANGELES

CA

12,197

11,607

15,371

459,754

721,958

2,628,903

5,727

5,527

13,138

1983

LOUISVILLE

KY

973

1,097

1,465

44,056

32,882

94,997

1,294

567

1,038

1983

MACON

GA

393

663

932

9,925

52,225

27,694

193

478

417

1983

MEMPHIS

TN

3,119

4,225

5,662

139,902

147,861

183,665

2,164

2,337

2,257

----------

MIAMI

FL

1,142

1,164

2,155

59,358

78,989

86,584

676

852

876

1985

MILWAUKEE

WI

1,516

1,741

2,423

59,807

73,002

176,966

664

870

2,112

1987

MINNEAPOLIS

MN

554

603

1,114

43,970

44,147

68,217

823

773

964

----------

MONROE

LA

270

350

429

8,117

35,512

16,369

165

231

90

1986

NEW HAVEN

CT

333

448

570

37,705

15,348

14,608

142

127

119

1963

NEW YORK CITY

NY

17,350

25,256

35,120

641,187

1,065,032

1,466,994

8,010

8,727

8,779

---------

NEWARK

NJ

918

1,231

1,500

60,781

124,118

144,114

1,067

901

1,200

1984

NORFOLK

VA

922

1,165

1,248

45,222

46,546

35,911

1,069

872

621

 

OAKLAND

CA

3,633

3,445

4,282

181,179

137,159

215,057

2,861

1,711

2,612

1980

OMAHA

NE

538

633

975

32,901

21,899

47,110

-------------

469

------------

1985

ORLANDO

FL

427

463

811

13,068

29,800

37,030

163

425

647

----------

PASADENA

CA

573

642

901

13,227

23,341

35,260

125

206

301

1980

PHILADELPHIA

PA

5,017

5,540

7,183

215,337

255,907

549,414

2,316

2,474

5,962

1984

PHOENIX

AZ

685

776

1,204

22,352

47,150

64,438

330

937

617

----------

PLAINFIELD

NJ

384

519

659

12,154

13,795

15,088

452

178

112

1981

PORTSMOUTH

VA

614

687

770

10,421

16,658

16,168

133

296

232

----------

RALEIGH

NC

655

984

1,619

16,717

37,804

56,653

298

721

718

----------

RICHMOND

VA

1,563

1,838

2,630

45,360

57,420

95,777

815

821

1,596

1983

Suggested Citation:"9. Trends in Minority-Owned Businesses." National Research Council. 2001. America Becoming: Racial Trends and Their Consequences, Volume II. Washington, DC: The National Academies Press. doi: 10.17226/9719.
×

City

Affirmative Action Plan Coverage

Percent Goal of Plan

Percent Change In the No. of Businesses 1982– 92

Percent Change in the No. of Businesses 1987– 92

GRAND RAPIDS

Construction Contracts

10%

96%

58%

GREENSBORO

Construction

10%

80%

48%

HAMPTON

No Plan

 

79%

26%

HARRISBURG

Construction

15%

49%

17%

HARTFORD

Construction Contracts

10%

72%

43%

HOUSTON

Construction

10%

36%

36%

JACKSON

No Plan

 

105%

47%

JACKSONVILLE

Goods and Services

10%

47%

27%

KANSAS CITY

Contracts

10%

29%

16%

KANSAS CITY

Construction

16%

45%

24%

LAKE CHARLES

Procurement

10%

55%

31%

LOS ANGELES

Construction

16%

26%

32%

LOUISVILLE

Credit-MBE Bids

15%

51%

34%

MACON

No Plan

 

137%

41%

MEMPHIS

No Plan

 

82%

34%

MIAMI

Goods and Services

50%

89%

85%

MILWAUKEE

All Projects

15%

60%

39%

MINNEAPOLIS

Construction Supplies

10%

101%

85%

MONROE

Goods and Services

10%

59%

23%

NEW HAVEN

Construction Projects

15%

71%

27%

NEW YORK CITY

Construction Contracts

10%

102%

39%

NEWARK

Construction

25%

63%

22%

NORFOLK

No Plan

 

35%

7%

OAKLAND

DOT Funded

30%

18%

24%

OMAHA

Construction

20%

81%

54%

ORLANDO

Construction/Services/Supplies

18%

90%

75%

PASADENA

No Plan

 

57%

40%

PHILADELPHIA

Construction Services.

15%

43%

30%

PHOENIX

All Areas

12%

76%

55%

PLAINFIELD

Contracts

25%

72%

27%

PORTSMOUTH

No Plan

 

25%

12%

RALEIGH

Construction—SW Raleigh

9%

147%

65%

RICHMOND

Construction

30%

68%

43%

Suggested Citation:"9. Trends in Minority-Owned Businesses." National Research Council. 2001. America Becoming: Racial Trends and Their Consequences, Volume II. Washington, DC: The National Academies Press. doi: 10.17226/9719.
×

City

State

Number of Firms, 1982

Number of Firms, 1987

Number of Firms, 1992

Total Sales, 1982 (000)

Total Sales, 1987 (000)

Total Sales, 1992 (000)

Total Employment 1982

Total Employment 1987

Total Employment 1992

Date Affirmative Action Plan Initiated

RICHMOND

CA

623

660

874

29,402

25,465

29,703

351

407

405

 

ROCHESTER

NY

498

655

926

17,999

21,001

23,699

244

366

365

----------

SACRAMENTO

CA

843

809

1,313

12,424

21,652

42,511

150

226

359

1985

SAN ANTONIO

TX

989

1,273

1,477

25,597

41,865

68,583

363

602

1,073

1980

SAN FRANCISCO

CA

1,980

1,965

2,230

80,193

99,296

220,799

1,264

1,209

2,005

1984

SAN JOSE

CA

998

961

1,351

30,516

36,739

48,252

515

295

567

1983

SEATTLE

WA

1,063

1,040

1,569

36,011

37,997

83,569

719

722

1,498

1986

SHREVEPORT

LA

827

1,018

1,216

27,063

29,054

32,066

477

385

697

1980

SPRINGFIELD

MA

265

429

515

8,441

13,748

13,058

69

105

95

1984

ST PETERSBURG

FL

566

788

919

17,889

29,158

26,528

219

343

198

1981

ST. LOUIS

MO

2,164

2,235

2,481

89,543

83,826

98,443

1,307

1,255

1,060

---------

STOCKTON

CA

260

299

374

6,478

11,901

15,855

79

139

180

1979

TACOMA

WA

287

287

442

5,451

10,719

13,144

72

101

190

1971

TALLAHASSEE

FL

310

501

799

12,885

41,893

33,944

158

597

371

1982

TAMPA

FL

606

800

1,118

20,263

88,342

70,478

392

695

845

1985

TULSA

OK

680

738

1,114

12,368

26,533

31,751

139

379

431

1981

TUCSON

AZ

259

247

448

7,863

7,592

10,521

150

126

137

1986

WASHINGTON D.C.

DC

8,966

8,275

10,111

268,488

411,941

451,861

3,417

4,085

4,277

----------

WILMINGTON

DE

332

377

544

12,485

16,991

41,932

223

286

1,488

1981

WINSTON-SALEM

NC

513

703

1,061

15,052

26,305

34,285

302

399

324

----------

WICHITA

KS

588

601

746

18,068

71,164

18,709

-------------

335

---------

1983

YOUNGSTOWN

OH

330

337

451

7,650

7,910

17,300

113

113

298

1980

Suggested Citation:"9. Trends in Minority-Owned Businesses." National Research Council. 2001. America Becoming: Racial Trends and Their Consequences, Volume II. Washington, DC: The National Academies Press. doi: 10.17226/9719.
×

City

Affirmative Action Plan Coverage

Percent Goal of Plan

Percent Change In the No. of Businesses 1982– 92

Percent Change in the No. of Businesses 1987– 92

RICHMOND

No Plan

 

40%

32%

ROCHESTER

Construction Projects

10%

86%

41%

SACRAMENTO

Procurement

20%

56%

62%

SAN ANTONIO

Construction

14%

49%

16%

SAN FRANCISCO

Public Works

30%

13%

13%

SAN JOSE

No Plan

 

35%

41%

SEATTLE

Construction Consulting

21%

48%

51%

SHREVEPORT

Construction

10%

47%

19%

SPRINGFIELD

Construction Contracts

5%

94%

20%

ST PETERSBURG

Construction

5%

62%

17%

ST. LOUIS

Contracts

10%

15%

11%

STOCKTON

Procurement

15%

44%

25%

TACOMA

Contracts Purchasing

15%

54%

54%

TALLAHASSEE

Contracts Over $100,000

15%

158%

59%

TAMPA

No Plan

 

84%

40%

TULSA

No Plan

 

64%

51%

TUCSON

Construction

17%

73%

81%

WASHINGTON D.C.

Construction

35%

13%

22%

WILMINGTON

Construction

15%

64%

44%

WINSTON-SALEM

No Plan

 

107%

51%

WICHITA

Construction

10%

27%

24%

YOUNGSTOWN

Construction

20%

37%

34%

 

SOURCE: Statistical data collected from the U.S. Bureau of the Census, 1985, 1990, 1996. Data on local area goals provided by Minority Business Enterprise Legal Defense and Education Fund, “Report on the Minority Business Enterprise Programs of State and Local Govenrments, 1988.”

Suggested Citation:"9. Trends in Minority-Owned Businesses." National Research Council. 2001. America Becoming: Racial Trends and Their Consequences, Volume II. Washington, DC: The National Academies Press. doi: 10.17226/9719.
×

and address discrimination as a matter of national concern. The test is whether there is a “rational relationship” between the remedy and the government’s interest. 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). The purpose of the plan was to increase the participation of minority-owned businesses in public construction contracts awarded by the city. In the course of the public hearings, evidence was introduced indicating that (1) even though the city had a 50 percent Black population, over the previous five years only 0.67 percent of the city’s prime construction contracts went to minority firms; (2) six local construction associations had virtually no minority members; (3) widespread discrimination existed in the local, state, and national construction industries; and (4) the proposed ordinance was consistent with the Fullilove decision. The plan was enacted for a period of five years and included Blacks, Hispanics, Asians, and Alaska Natives. It required recipients of prime construction contracts to subcontract at least 30 percent of the contract’s value to minority firms. A waiver from the goal was provided in cases where no suitable minority firms were available.

Five months after the enactment of the plan, the city invited bids for the installation of plumbing fixtures at the city jail. The J.A.Croson Company submitted the only bid on the project. Prior to doing so, the company contacted several minority businesses. One, Continental Metal Hose, expressed an interest in serving as a subcontractor on the project, but had to obtain a price quotation for fixtures before it could submit its bid. The supplier Continental contacted for a bid had already submitted a bid to Croson and refused to provide a quote to Continental. Another supplier refused to provide Continental a quote until it had obtained a credit check, a procedure that would take a minimum of 30 days. Because of this, Croson submitted its bid without the minority requirement. Shortly after the bid opening, Croson submitted a waiver requesting release from the minority requirement. Continental learned of this and informed the city that it could supply the fixtures. Continental’s quoted price, however, was $6,183.29 higher than the price Croson had stipulated in its proposal. Croson was given 10 days to comply with the minority requirement. Instead the company argued for a waiver or the right to

Suggested Citation:"9. Trends in Minority-Owned Businesses." National Research Council. 2001. America Becoming: Racial Trends and Their Consequences, Volume II. Washington, DC: The National Academies Press. doi: 10.17226/9719.
×

increase the contract price. The city rejected both requests and decided to rebid the contract. Croson filed suit in the district court claiming that the program was unconstitutional.

The District Court upheld the constitutionality of the city’s program. The U.S. Court of Appeals, using Fullilove as a standard, affirmed the district court’s decision. Croson then appealed to the U.S. Supreme Court. 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. Supreme Court. This time the Supreme Court affirmed the Circuit Court’s decision. It was the first time a majority, rather than a plurality, agreed that strict scrutiny would be applied to racial preference programs. In 1987, the majority ruled that Sections 1 and 5 of the Fourteenth Amendment limit the powers of states, in contrast to the more sweeping powers of Congress—i.e., Congress is not required to meet the strict scrutiny standard, but states and localities are. The decision held that the program denied certain citizens the opportunity to compete for a fixed percentage of contracts based solely on their race. Justice Sandra Day O’Connor argued that all classifications based on race, whether benefiting or burdening minorities or nonminorities, will be subject to strict scrutiny.

In establishing its program, the city of Richmond initially relied on statements of minority business owners attesting to their exclusion from the skilled trades and encounters with discrimination in the industry and the fact of only 0.67 percent of contracts being awarded to minority businesses. The Supreme Court ruled, however, that the city’s findings did not provide a strong enough basis of evidence to implement a remedial race-based program, because the evidence did not point to specific discrimination. Richmond was also criticized for including Hispanics, Asians, American Indians, and Alaska Natives in its plan when there was no evidence of past discrimination against them. The Court was also critical of the city’s plan because it allowed all minorities to be eligible no matter where they resided, and the Court viewed the 30 percent minority requirement as a quota.

The Croson decision left little doubt about how the Court would rule on state and local affirmative-action programs that did not conform to the strict scrutiny standard. The only question was whether it would

Suggested Citation:"9. Trends in Minority-Owned Businesses." National Research Council. 2001. America Becoming: Racial Trends and Their Consequences, Volume II. Washington, DC: The National Academies Press. doi: 10.17226/9719.
×

apply the same standard to programs of the federal government. The distinction between the powers of federal, state, and local agencies to implement racial mandates was dissolved in June 1995 by the Supreme Court’s decision in Adarand Constructors v. Pena and the U.S. Department of Transportation. The Supreme Court ruled in a 5-to-4 vote that strict scrutiny must be the standard of review for race-based programs of the federal government as well (Greenhouse, 1995). In making this shift, the Court voided all previous rulings that interpreted the equal protection clause of the constitution as having a different application at different levels of government.

By the time the Croson decision was rendered, Atlanta had become the focal point for cities interested in implementing affirmative-action programs. By the mid-1980s, Atlanta’s program, established in mid-1970, had become the model for most of the nation’s municipal affirmative-action programs. Atlanta’s leaders viewed Croson as a challenge to the achievement of civil rights. As a result, the expense of complying with the decision’s strict scrutiny standard was secondary in importance to the need to demonstrate nationally that the strict scrutiny standard could be met and that affirmative action is a legal remedy for past injustices. In 1989, the city of Atlanta commissioned a disparity study supervised by economists Andrew Brimmer and Ray Marshall; it was commissioned at more than $500,000 and completed in 1990. The study covered contracting and procurement in the city of Atlanta and Fulton County.

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. Uncertainty about appropriate evidence, along with the absence of a standard measure of cost, led to a situation whereby the very extensive, and expensive Atlanta Disparity Study set the initial methodology, and the market price.

Other public agencies gave in to a classic case of what economist Joseph Stiglitz calls “the dependence of quality on price” —i.e., using price as an indicator of quality. Agencies all over the country used Atlanta as a yardstick. Eventually, state and local governments spent more than $13 million on disparity studies; the Urban Mass Transit Administration spent an additional $14 million between January 1991 and June 1992 (La Noue, 1993). In 1990, 34 disparity studies were commissioned at an average cost of $243,913, according to the Joint Center for Political and Economic Studies. The University of Maryland, Baltimore County, maintains a clearing-house of disparity studies. In 1996, their inventory consisted of 102 studies conducted in 27 different states and the District of Columbia. La Noue

Suggested Citation:"9. Trends in Minority-Owned Businesses." National Research Council. 2001. America Becoming: Racial Trends and Their Consequences, Volume II. Washington, DC: The National Academies Press. doi: 10.17226/9719.
×

(1994) found that by the summer of 1994, state and local governments had spent more than $40 million on disparity studies.

Persistent legal challenges forced agencies to add more and more dollars to the disparity-study coffers to patch up weaknesses in existing studies or conduct new ones. For example, nine agencies in the Memphis metropolitan area paid $1.3 million for a disparity study. The cities of Miami and St. Louis spent hundreds of thousands of dollars on disparity studies and were forced to repeat these expenditures because the initial studies did not withstand court challenges.

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. What is needed is a Judicial Commission to set the guidelines for compiling evidence and to determine which methods are acceptable and which are not. In the meantime, the Croson requirement has become practically impossible to meet and as a result federal, state, and local programs are being dismantled.

The vagueness of the guidelines for meeting strict scrutiny and the exorbitant (sometimes extortionist) cost of complying with the Croson decision are major impediments to equal treatment. By March 1991, just two years after Croson, of the slightly more than 200 programs nationally, 66 had been challenged legally, 33 had been voluntarily terminated, and 65 were under reevaluation. Between 1982 and 1992, cities with affirmative-action plans saw Black businesses increase 65 percent; cities without plans, 61 percent. After Croson, between 1987 and 1992, cities with affirmative-action plans saw Black businesses increase 41 percent; cities without plans, 36 percent. Although a 5 percent differential may not be statistically significant, these numbers represent livelihoods. Strict scrutiny is indeed both “strict in theory” and “fatal in fact.”

Despite the obstacles, by the late 1980s and early 1990s, a new Black entrepreneurial class had emerged in metropolitan areas across the country. And, despite the growing challenges to minority business programs, local governments and the federal government continued to support these programs and to appropriate funds in an attempt to have them comply with legal guidelines.

POSSIBLE FUTURE TRENDS

At the dawn of a new century, it is a good time to take stock of the economic progress of minority-owned businesses. Another reason to do this is because the economy is experiencing one of the most vigorous and long-lasting periods of growth in peacetime history. The current recov-

Suggested Citation:"9. Trends in Minority-Owned Businesses." National Research Council. 2001. America Becoming: Racial Trends and Their Consequences, Volume II. Washington, DC: The National Academies Press. doi: 10.17226/9719.
×

ery, which began in 1991, has brought unemployment to its lowest level in a quarter of a century. Equally important is the fact that growth has accelerated, while core inflation, now just 2.2 percent, is the lowest in 32 years.

In general, the economic status of Blacks has improved during this period of growth. In particular, poverty among Blacks is at the lowest level since the government began tracking the figures in 1959. In 1998, the average household income of Blacks increased by 3.6 percent, while the income of Whites increased by 2.2 percent. But these general improvements hide the fact that there are still large employment and income disparities between Blacks and Whites. Even though average household income among Blacks improved, it is still only 63 percent that of Whites. Even though the poverty rate among Blacks might be the lowest on record, 30 percent of Black families still live below the poverty line. And while the rate of unemployment among Whites is 3.7 percent, it is 9.2 percent for Blacks. Twenty years ago, Blacks comprised 20 percent of all unemployed workers; that percentage has not changed, even though Blacks now constitute only 11.2 percent of the labor force. In fact, racial disparities have not changed significantly over the last 20 years.

The current economic expansion forces the government to face a rather unsettling reality: the economy is now posting its best performance in peacetime history, yet large racial disparities in income and employment still remain; thus economic growth is necessary but not sufficient to reduce these disparities.

Between 1982 and 1992, the number of Black-owned businesses grew at a rate of 7.25 percent annually, and their employment capacity grew at a rate of 11.02 percent annually. If the current growth rate is maintained between 1992 and 2010, there will be about 2 million Black-owned firms. Likewise, if employment in these firms continues to grow at 11.02 percent annually, these firms will employ approximately 2.3 million workers by 2010. That will be equivalent to 12.1 percent of the projected 2010 Black workforce. 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. This trend, if sustained through the first decade of the next century, has important implications for Black unemployment and upward mobility. It will be useful to check the validity of this theory by examining the 1997 census of Black-owned business data when they are released around the year 2000.

If these trends are valid, promoting the growth of Black-owned businesses means reducing society’s unemployment burden, providing jobs

Suggested Citation:"9. Trends in Minority-Owned Businesses." National Research Council. 2001. America Becoming: Racial Trends and Their Consequences, Volume II. Washington, DC: The National Academies Press. doi: 10.17226/9719.
×

where they are most needed, and improving the income status of people who are too often trapped below the poverty line.

Assisting Blacks in creating employment opportunities through supporting business development initiatives is a fundamental strategy for the new century. The changes currently taking place among these businesses are significant, and the possibility of reducing racial disparities through promoting their continued growth is promising. Past policies, centering on promoting general economic growth with the assumption that employment growth will “trickle down” to Blacks, have reduced Black unemployment in terms of absolute numbers but failed to narrow the racial income and employment gap. Promoting Black-owned businesses has the potential to succeed where other policies have failed. Not only do such policies help remedy past injustices, but they also make good sense, economically and socially.

IMPORTANT QUESTIONS FUTURE RESEARCH MUST ANSWER

The U.S. Supreme Court has not disallowed the use of race-based remedies to redress identified discrimination, though it has made it exceedingly difficult to do so. Nevertheless, the possibility still exists. Objective research is needed to establish the criteria and the methodology for meeting the strict scrutiny standard.

From a practical standpoint, many successful minority-owned businesses are dependent on government programs. In the short run, gaining equal access to government contracting and subcontracting in the absence of such programs, or replacing this revenue source, will be difficult. As such, the decrease of affirmative action is likely to have some significant adverse consequences on a rather large sector of minority-owned businesses. It is, therefore, important for researchers to measure the magnitude of this impact and estimate the costs and benefits of alternative strategies for minority business development.

The current growth trend of Black-owned businesses, projected to the year 2010, has some significant employment implications. Research is needed to examine this trend more rigorously.

Black-owned businesses are growing at twice the rate of all small businesses, but some are experiencing limits to their continued growth as a result of their more limited access to equity and debt capital. Many of these business owners are now willing to give up equity for growth, but potential investors are not convinced that there is adequate capacity and profitable outlets for investments in Black-owned businesses. Researchers can facilitate this process through publishing and disseminating findings that accurately document the state of Black-owned businesses.

Suggested Citation:"9. Trends in Minority-Owned Businesses." National Research Council. 2001. America Becoming: Racial Trends and Their Consequences, Volume II. Washington, DC: The National Academies Press. doi: 10.17226/9719.
×

Disposable income of Black households is approaching $0.5 trillion. In addition, Blacks comprise a significant percentage of some major urban markets and are trendsetters in other industries such as specialty clothing, sports, and entertainment. Thus research regarding the income, spending, and demographic patterns of minorities is worth further consideration. Such research will aid in the identification of business opportunities and serve the unmet needs of minority households and is worthy of a university research center for minority business strategies and dynamics.

REFERENCES

Aldrich, H., and R.Waldinger 1990 Ethnicity and entrepreneurship. Annual Review of Sociology 16:111–135.

Alexander, T., Sr. 1992 Beyond the Timber Line: The Trials and Triumphs of a Black Entrepreneur. Edgewood, Md.: M.Duncan.


Bates, T. 1987 Self-employed minorities: Traits and trends. Social Science Quarterly 68(3):539–551.

1990 The characteristics of business owners database. Journal of Human Resources 25(4): 752–756.

1991 Major Studies of Minority Business: A Bibliographic Review. Washington, D.C.: Joint Center for Political and Economic Studies.

1997 Race, Self-Employment and Upward Mobility: An Illusive American Dream. Baltimore: The Johns Hopkins University Press.

Borjas, G., and S.Bronars 1989 Consumer discrimination and self-employment. Journal of Political Economy 97(3): 581–605.

Boston, T. 1995 Characteristics of Black-owned corporations in Atlanta: With comments on the SMOBE undercount. Review of Black Political Economy 23(4):85–99.

1996 Five-year review of the equal opportunity program of the City of Atlanta. Report to the Atlanta City Government (September). Unpublished report.

1998 Affirmative Action and Black Entrepreneurship. New York: Routledge.


Clayton, E. 1996 Statement of Congresswoman Eva Clayton before the U.S. House of Representatives. Committee on Small Business, Hearing on H.R. 3994, The Entrepreneur Development Act of 1996. Appendix, pp. 73–77.

Coleman, L., and S.Cook 1976 The Failures of Minority Capitalism: The Edapco Case. Phylon 37(1):44–58.


Dixon, D. 1990 The dismantling of affirmative action programs: Evaluating City of Richmond v. J.A.Croson Co. Journal of Human Rights VII:35–57.


Evans, D., and L.Leighton 1989 Some empirical aspects of entrepreneurship. The American Economic Review 79(3): 519–535.


Farlie, R., and B.Meyer 1996 Ethnic and racial self-employment differences and possible explanations. The Journal of Human Resources xxxi(4):757–793.

Suggested Citation:"9. Trends in Minority-Owned Businesses." National Research Council. 2001. America Becoming: Racial Trends and Their Consequences, Volume II. Washington, DC: The National Academies Press. doi: 10.17226/9719.
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Greenhouse, L. 1995 By 5–4 justices cast doubt on U.S. programs that give preferences based on race. New York Times (Dec. 6):1, 21.


La Noue, G. 1993 Social science and minority set-asides. The Public Interest 111:49–62.

1994 Standards for the second generation of Croson-inspired disparity studies. The Urban Lawyer 26(3):485–540.


Minority Business Enterprise Legal Defense and Education Fund 1988 Report on the Minority Business Enterprise Programs of State and Local Governments. Unpublished report.


National Cooperative Highway Research Program 1992 Minority and disadvantaged business enterprise requirements in public contracting. Legal Research Digest 25(September):1–28.

Nucci, A. 1992 The characteristics of business owners database. Discussion paper, Center for Economic Studies, U.S. Bureau of the Census. CES 92–7.


Rice, M. 1991 Government set-asides, minority business enterprises, and the Supreme Court. Public Administration Review 51(2):114–122.


Stoelting, D. 1990 Minority business set-asides must be supported by specific evidence of prior discrimination. Cincinnati Law Review 58:1097–1135.


U.S. Bureau of the Census 1985 Survey of Minority-Owned Business Enterprises: Black, 1982, MB82–1. Washington, D.C.: U.S. Government Printing Office.

1990 Survey of Minority-Owned Business Enterprises: Black, 1987 (SMOBE) MB87–1. Washington, D.C.: U.S. Government Printing Office.

1991 Characteristics of Business Owners, 1987, CBO87–1. Washington, D.C.: U.S. Government Printing Office.

1996 Survey of Minority-Owned Business Enterprises: Black, 1992, MB 92–1. Washington, D.C.: U.S. Government Printing Office.

1997 Characteristics of Business Owners, 1992, CBO92–1. Washington, D.C.: U.S. Government Printing Office.


Walker, M., Jr. 1986 The SBA 8(a) programs, minority set-asides, and minority business development. Paper prepared for Race, Values and American Legal Process, April 11, Georgia State University, pp.1–78.

Suggested Citation:"9. Trends in Minority-Owned Businesses." National Research Council. 2001. America Becoming: Racial Trends and Their Consequences, Volume II. Washington, DC: The National Academies Press. doi: 10.17226/9719.
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America Becoming: Racial Trends and Their Consequences, Volume II Get This Book
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The 20th Century has been marked by enormous change in terms of how we define race. In large part, we have thrown out the antiquated notions of the 1800s, giving way to a more realistic, sociocultural view of the world. The United States is, perhaps more than any other industrialized country, distinguished by the size and diversity of its racial and ethnic minority populations. Current trends promise that these features will endure. Fifty years from now, there will most likely be no single majority group in the United States. How will we fare as a nation when race-based issues such as immigration, job opportunities, and affirmative action are already so contentious today?

In America Becoming, leading scholars and commentators explore past and current trends among African Americans, Hispanics, Asian Americans, and Native Americans in the context of a white majority. This volume presents the most up-to-date findings and analysis on racial and social dynamics, with recommendations for ongoing research. It examines compelling issues in the field of race relations, including:

  • Race and ethnicity in criminal justice.
  • Demographic and social trends for Hispanics, Asian Americans, and Native Americans.
  • Trends in minority-owned businesses.
  • Wealth, welfare, and racial stratification.
  • Residential segregation and the meaning of "neighborhood."
  • Disparities in educational test scores among races and ethnicities.
  • Health and development for minority children, adolescents, and adults.
  • Race and ethnicity in the labor market, including the role of minorities in America's military.
  • Immigration and the dynamics of race and ethnicity.
  • The changing meaning of race.
  • Changing racial attitudes.

This collection of papers, compiled and edited by distinguished leaders in the behavioral and social sciences, represents the most current literature in the field. Volume 1 covers demographic trends, immigration, racial attitudes, and the geography of opportunity. Volume 2 deals with the criminal justice system, the labor market, welfare, and health trends, Both books will be of great interest to educators, scholars, researchers, students, social scientists, and policymakers.

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