But around 2020, things started to change.
In a normal year, the local urban redevelopment authority grants about 30 to 50 loans. In 2020, it made more than 350 loans — and almost half went to black-owned businesses.
Pittsburgh is part of a larger trend. African-American business owners were one of the hardest hit groups at the start of the pandemic, with the number of self-employed people falling 31% from the first quarter of 2020 to the second, according to census data compiled by Robert Fairlieassociate researcher at the University of California at Santa Cruz.
But now this band is making a comeback. Just over 1.2 million African Americans were self-employed in February 2022, compared to just under 1.1 million in February 2020. Another study from website domain company GoDaddy found that black owners made up 26% of all websites created for new businesses since the start of the pandemic, up from 15% previously.
The gains are greater than what other demographic groups have seen: According to Fairlie’s analysis of census data, the number of black small business owners was 28% higher in the third quarter of 2021 than it has was before the pandemic, compared to 19% for Latino business owners and 5% for white and Asian business owners.
“I definitely see it here on the ground in Pittsburgh. … Not only is the narrative changing, but our actions and results are starting to increase as well,” said Diamonte Walker, deputy executive director of the Urban Redevelopment Authority of Pittsburgh. , Which one is invest $5 million in minority and women-owned businesses.
It’s too early to tell how many of these self-employed will create larger businesses and also employ others. Economists suggest interpreting the figures with caution, as self-employment includes not only small business owners, but also construction workers like Uber drivers. Yet this trend offers hope that the lofty promises made by corporations after last summer’s social justice protests to invest more in the black community have resulted in real, tangible change.
“Healthy black businesses are key to healthy black communities,” Walker said.
A Pandemic and a Racial Calculation
The growth of self-employment among blacks has several potential reasons. First, ownership of African-American businesses was also already growth before the pandemic.
“It’s not a weird coincidence. There’s a huge demand for goods and services, and a lot of people are realizing, ‘I can do this without having to work for someone else,'” said Ron Hetrick, economist at Emsi Burning Glass.
Hetrick also pointed out that the counties with the largest increases in business start-ups over the past two years all have large black and Hispanic populations: Chicago (Cook County), Detroit (Wayne County), Los Angeles , Houston (Harris County) and Miami-Dade County.
“The good news of all of this is that when you see business formation happening in very ethnically diverse populations, that would generally suggest that you would start to see an increase in the hiring of those populations as well,” he said. he declared.
But why would African Americans, in particular, have experienced greater growth in self-employment than other groups? One potential reason is that the widespread protests over the murder of George Floyd in the summer of 2020 have led to greater awareness of social justice issues, leading to more governments and businesses pledging to increase their contracts. with black-owned businesses.
“There have been two changes lately: one is the pandemic, but there’s also been the racial reckoning,” said Erica Groshen, senior economics adviser at the University’s School of Industrial and Labor Relations. Cornell.
Government support may also have helped spur new businesses in the black community. A study of eight states, published by the National Bureau of Economic Research, found a correlation between stimulus checks and new businesses in black neighborhoods.
Initially, government assistance bypassed black business owners. A small business survey conducted by the Federal Reserve System, conducted in the fall of 2020, found that while 79% of white-owned businesses got all the financing they requested when they applied for Paycheck Protection Program credit, only 43 % of black businesses have done so. Additionally, black companies that applied were five times more likely than white companies to receive no PPP funding.
However, subsequent rounds of PPP funding have focused more on helping small businesses, the self-employed, and underserved communities. A study published in January by Robert Fairlie and Frank Fossen found that while loans from the program’s first cycle were disproportionately less likely to go to minority communities early on, later cycles reversed that trend.
“I guess the revised PPP program has helped … but also increased awareness of racial inequalities by customers and large companies looking for suppliers,” Fairlie said.
“It signals what is possible”
Despite these gains, much remains to be done. A Brookings establishment report estimates that 800,000 more black-owned employers’ businesses are needed to achieve equity. Moreover, simply starting a business does not guarantee that it will survive in the long term.
“There are a lot of businesses starting up, but how do you help them to last?” asked Tracey Clark Jeffries, a black business owner herself as CEO of Capital Consulting Services in St. Louis.
Jeffries has noticed that many businesses in his community are open — but struggling. For example, she’s heard restaurant owners on Martin Luther King Jr. Boulevard in St. Louis say they’re seeing fewer customers because more people are working from home now.
“What black-owned small businesses need is a more structured model that can help them last over a three to five year period,” Jeffries said.
Still, Jeffries says his own business has actually gotten stronger since the pandemic. She turned to advising organizations on how to better utilize office space they no longer needed with a remote workforce, and she also landed lucrative state contracts.
And just seeing new businesses start up can have a powerful impact on a community.
“You see a glaring wealth gap between blacks and whites. This disparity is felt not only economically, but also psychologically and emotionally,” said Walker of the Pittsburgh Urban Redevelopment Authority. “As these black businesses begin to thrive, it signals what is possible.”