Significant financial influence of small businesses owned by African Americans
In an effort to improve economic opportunities in rural areas and invest in underserved communities, President Biden signed Executive Order 13985, Advancing Racial Equity and Support for Underserved Communities Through the Federal Government, on his first day in office. This order has been instrumental in shaping policies aimed at addressing long-standing racial disparities, particularly in the realm of Black-owned businesses.
According to the White House Fact Sheet, the Executive Order aims to strengthen community partnerships and create a new annual process to strengthen racial equity and support for underserved communities. In 2021, there were 161,031 U.S. businesses that were Black-owned, generating a staggering $206 billion in annual revenue and supporting 3.56 million U.S. jobs. This represents a 23% growth rate in Black-owned businesses between 2017 and 2021, as reported by the Census Bureau's Annual Business Survey.
However, racial disparities persist. In 2021, homeownership among White householders was 71%, in contrast to 46% for Black Americans. Non-Hispanic white householders had a median household wealth of $187,300, in contrast to $14,100 for Black householders. Predatory lending and historical practices like redlining have hindered Black Americans in their quest for upward mobility, as U.S. banks denied mortgages to Black applicants and other racial/ethnic minorities.
To address these issues, initiatives like Housing Matters, an Urban Institute Initiative, suggest increasing building permits, expanding affordable housing, encouraging changes to credit scoring, providing accessible down payment assistance (DPA), and better targeting local resources to increase Black homeownership. Similarly, the Executive Order instructs agencies to expand procurement opportunities for small disadvantaged businesses through grants from the Bipartisan Infrastructure Law, Inflation Reduction Act, and other investments and programs.
Moreover, the growth of Black Businesses has profound impacts on American society and the economy. Policies aimed at supporting these businesses, such as Executive Order 13985, can help to bridge the wealth gap and foster a more equitable society. The order pledged to increase the share of federal contracting dollars awarded to small disadvantaged businesses by 50 percent by 2025.
Female founders and entrepreneurs from historically underrepresented and marginalized groups, including minority-owned, women-owned, and veteran-owned businesses, align with Small Disadvantaged Businesses (SDBs) to gain enhanced federal contracting opportunities following Executive Order 13985 in 2021. Additionally, initiatives like Next City suggest policy measures to protect Black communities and ensure affordable housing remains viable.
During Black History Month, we celebrate the successes of Black America and highlight where more work needs to be done, particularly in the areas of wealth and housing disparities. The Census Bureau's Annual Business Survey reported $141.1 billion in annual receipts, 1.3 million employees, and around $42.2 billion in annual payroll for Black-owned businesses in 2021. Around 40% of Black adults believe businesses in Black communities should be Black-owned, underscoring the importance of supporting these businesses and addressing the racial disparities that persist.
The National Bureau of Economic Research studied the link between federal relief payments and their distribution, finding a presumable role that debt relief payments played in the growth of new firm formation in Black neighborhoods. As we move forward, it is essential that we continue to address these disparities and work towards a more equitable society for all.
