Stimulus Bypasses Minority Businesses

Criticism abounds of the unequal distribution of stimulus funds: high per capita allocations to low population, low unemployment states like Wyoming versus low per capita amounts to struggling states like CA;  and the limited allocations reaching women- and minority-owned businesses compared to their proportion of the population.

The Kirwan Institute for the Study of Race & Ethnicity at The Ohio State University finds that "While approximately 14 percent of businesses are minority owned, the study shows that minority owned businesses received only 9.6 percent of federal contracts."  Almost 3 in 10 businesses are owned by women, yet these firms received only 3% of stimulus funds.  This disturbing inequity raises questions about the goals of the stimulus and the (surprising?) lack of focus on reducing economic inequality.

Women, blacks and Latin@s own about 40% of all businesses in the US, but account for less than 6% of all business revenue - i.e., they represent a disproportionate amount of small firms.  Compared to revenues, the allocation of 6% of stimulus funds to these firms seems fair enough.  Certainly, a key goal of the stimulus is to save or create existing jobs, indicating that money will flow to larger firms that have more employees.

Less clear is how we should interpret the goal of spurring long-term economic growth and what that means for the imbalance in stimulus distribution.  Women- and minority-owned firms are often smaller because women and minority men have smaller networks, restricted access to financing, and lower assets compared to white men, reducing their ability to launch and grow their companies.  This small size impairs their ability to compete for large business contracts - it's why governments deliberately have minority "set-asides" - so these firms have a reliable place to compete for contracts big enough to spur firm growth - assuming, of course, they can deliver.

Research shows that white-owned firms have average annual sales of $439k, whereas black-owned firms have average annual sales of only $74k.  That is an enormous economic disparity, accompanied by differences in educational and socio-economic backgrounds between white and Asian business owners versus black and Latin@ owners.  Given this reality, distributing stimulus funds is a once in a generation opportunity to seed small firms, lower- and moderate-income communities, and organizations that aid disadvantaged populations.  In some cases, that's happening, such as with the construction of new community health centers.  But we're bypassing our opportunity to level the economic playing field for minority- and women-business owners and the communities in which they live and work.

Turns out, that maybe isn't a goal of the stimulus.  Long-term economic growth apparently means for the same old beneficiaries, for the same old businesses as usual.

(Photo of "Your Local Black Minority Contractors" in New Orleans by Editor B)