Greg Wohlford/Erie Times-News via AP
Royal Crown Barbershop owner Jameal Lofton trims the hair of a young customer in Erie, Pennsylvania, February 2018.
On Yelp, businesses owned by and operated in black communities get fewer and worse reviews, says researcher Andre Perry. Poring over data, he has found that highly rated businesses in black neighborhoods experience slower revenue growth than poorly rated businesses in otherwise similar neighborhoods. This slow growth causes black businesses to miss out on more than $1.3 billion in potential revenue annually.
Policy wonks, economists, and small-business owners gathered earlier this month at the Brookings Institution in Washington to discuss Perry’s co-authored report “Five-Star Reviews, One-Star Profits: The Devaluation of Businesses in Black Communities.” Race and class bias are major factors in determining which small businesses can build and sustain success. The data show that consumers are more likely to frequent a business in a majority-white neighborhood than a similar business in a majority-black neighborhood, according to Perry. The data also suggest that investment is key to changing the dynamic. “I cringe when I hear things like ‘We need another program to help black business,’” Perry told the audience. “No, we need a direct investment in black businesses, and we need investments in the communities around them.” In his view, the bureaucratic red tape that accompanies federal programs, even those with good intentions, can do more harm than good for black businesses.
So what can the federal government do to ensure that startups and small businesses can survive, grow, and reinject that capital back into the community? Speaking at Brookings, Martha Legg Miller, a U.S. Securities and Exchange Commission advocate, discussed how agencies can be more receptive to the needs of small businesses by making the process more intimate and less intricate. Much of this relates to galvanizing investment in the black community and then using that investment to lessen the racial wealth gap, added Tynesia Boyea, CEO of the impact investment firm CapEQ. Each panelist emphasized the need for more direct capital flowing into black communities.
Federal agencies can be more receptive to the needs of small businesses by making the process more intimate and less intricate.
Even black businesses that do well initially struggle to build upon investment due to the multiple economic and cultural barriers. Often, black entrepreneurs are unable to make valuable professional connections that they can utilize. “We hear a lot of the same stories,” said Miller, “‘It’s really hard for me because I don’t have a network of really net-worth people that can cut big checks, what do I do?’”
Pumping capital into black businesses is just one of the early steps in the process of lessening the racial wealth gap. Small-business owners and D.C. developers joined a subsequent panel to discuss ways to foster black entrepreneurship. “It’s always a small thing. People think we just raise [the minimum wage] to $15, but there’s not enough affordable housing,” said Tony Tomelden, owner of popular Northeast D.C. tavern The Pug. He described how some of his workers commute an hour because Washington has become so prohibitively expensive. For Tomelden and many other small-business owners, it will take a platform of detailed, progressive economic policy to uplift black business owners.
On the campaign trail, each Democratic presidential candidate has made a point of releasing policy packages for black Americans as part of their overall platforms. Former Vice President Joe Biden’s platform emphasizes homeownership, including the creation of a refundable tax credit of up to $15,000 and the establishment of a national standard for housing appraisals to counteract racial bias. Senator Bernie Sanders’s plan seeks to address the five central types of violence waged against black, brown, and indigenous Americans: physical, political, legal, economic, and environmental. It highlights ending housing discrimination practices; offering banking services at every post office; and making public colleges, universities, and trade schools 100 percent tuition-free.
As the field of entirely white candidates markets themselves to communities of color, lines are being drawn within the community as well. Voters under 30 drift toward the political revolution of Senator Sanders, while older voters tend to prefer the familiar politics of Joe Biden. Regardless of who earns the Democratic nomination, black Americans need a new plan for developing wealth. Will one that presents new growth and autonomy emerge, or will black communities be lambasted with even more programs and initiatives? Regardless of who ends up representing the Democratic Party in the general election, they must understand that there is nothing wrong with black Americans that stopping racism cannot fix.
