Minorities in the Labor Force - Minorities In Business

According to the U.S. Census Bureau, in 2002 the overwhelming majority of business owners in the United States were white, non-Hispanic individuals. All minority groups except for Asian-Americans were underrepresented among business owners compared with their presence in the U.S. residential population age twenty-five and over. Only 3.9% of business owners were of Hispanic origin, even though the U.S. population was 11.1% Hispanic. African-Americans represented only 1.6% of business owners, even though 11.6% of the U.S. population was African-American. Only 0.5% of business owners were Native American or Alaska Native, compared with 1.3% of the U.S. population. Only Asian-Americans, who represented 5.9% of business owners, were overrepresented in comparison with their presence in the U.S. population (4.4%). (See Table 4.10.)

TABLE 4.10 Business owners by gender, ethnicity, and race, 2002 Adapted from "Gender, Veteran Status, Ethnicity, and Race," in 2002 Survey of Business Owners: Advance Report on Characteristics of Employer Business Owners: 2002, 2002 Economic Census, U.S. Census Bureau, July 2005, http://www.census.gov/econ/census02/sbo/sboadvance.htm (accessed January 5, 2005)

TABLE 4.10
Business owners by gender, ethnicity, and race, 2002
Gender, ethnicity, and race	Percent of employer business ownersa	Percent of U.S. resident population (25 years and over)
aData in this column include owners of all ages, but only one percent reported themselves as under the age of 25.
bOwners reporting more than one race are counted in each race group reported (NA)=Not applicable.
SOURCE: Adapted from "Gender, Veteran Status, Ethnicity, and Race," in 2002 Survey of Business Owners: Advance Report on Characteristics of Employer Business Owners: 2002, 2002 Economic Census, U.S. Census Bureau, July 2005, http://www.census.gov/econ/census02/sbo/sboadvance.htm (accessed January 5, 2005)
Gender
Male	70.7	48
Female	26.5	52
Not reported	2.8	(NA)
Ethnicity
Hispanic	3.9	11.1
Non-Hispanic	93	88.9
Not reported	3.1	(NA)
Raceb
White	88.3	83.5
Black or African American	1.6	11.6
American Indian and Alaska Native	0.5	1.3
Asian	5.9	4.4
Native Hawaiian and Other Pacific Islander	0.1	0.3
Not reported	4.1	(NA)

According to Survey of Minority-Owned Business Enterprises (2001), the Census Bureau reports that in 1997 the largest number of businesses owned by African-Americans, Hispanics, and Asians and Pacific Islanders were service-industry firms. The group of non-classified industries accounted for the largest percentage of most Native American and Alaska Native businesses, followed by the service industry.

Minority Women-Owned Businesses

According to the Census Bureau, 26.5% of business owners in 2002 were women. (See Table 4.10.) The Center for Women's Business Research reports in Businesses Owned by Women of Color in the United States, 2004: A Fact Sheet (2004, http://www.womensbusinessresearch.org/minority/BusinessesOwnedbyWomenof ColorintheUS.pdf) that between 1997 and 2004 the number of businesses that were owned by women of color grew by an astounding 54.6%, from 923,403 firms in 1997 to 1,427,820 firms in 2004. In 2005 one in five (21.4%) of all privately held, women-owned businesses in the United States were owned by minority women. These businesses generated almost $147 billion in sales in 2004. (See Figure 4.1.) Most of the firms (61%) were in the service industry.

Of the businesses owned by minority women in 2004, 553,618 (38.8%) were owned by Hispanic women FIGURE 4.1 Businesses owned by women of color, 1997 and 2004 "Businesses Owned by Women of Color Number 1.4 Million, Employ Nearly 1.3 Million, and Generate Nearly $147 Billion in Sales Nationwide," in Businesses Owned by Women of Color in the United States, 2004: A Fact Sheet, Center for Women's Business Research, 2004, http://www.womensbusinessresearch.org/minority/BusinessesOwnedbyWomenofColorintheUS.pdf (accessed January 9, 2006)419,793 (29.4%) were owned by Asian and Pacific Islander women, 414,472 (29%) were owned by African-American women, and 90,730 (6.3%) were owned by Native American and Alaska Native women. (See Table 4.11.) Firms owned by Asian and Pacific Islander women and Native American and Alaska Native women experienced the greatest growth between 1997 and 2004 (both grew by 69.3%). Hispanic women-owned firms grew by 63.9%, while African-American women-owned firms experienced the slowest growth, at 32.5%, but still much higher than the growth of all privately owned businesses in the United States during that period.

Minority "Set-Aside" Programs under Increasing Attack

Many levels of government, including the federal government, have "set-aside" programs that award a certain percentage of contracts to minority- and women-owned businesses. These programs were developed to remedy the effects of past discrimination and to address the difficulties these firms faced in competing with larger, more established firms for government contracts. Minority businesses are often newer and smaller and have difficulty competing with older, larger businesses that know the process and can afford to make lower bids. Acquiring government contracts can be involved and confusing for businesses unfamiliar with the process. TABLE 4.11 Private businesses owned by minority women, by race/ethnic group, 2004 "Majority-Owned, Privately-Held Firms Owned by Women of Color in the U.S., 2004," in Businesses Owned by Women of Color in the United States, 2004: A Fact Sheet, Center for Women's Business Research, 2004, http://www.womensbusinessresearch.org/minority/BusinessesOwnedbyWomenofColorintheUS.pdf (accessed January 9, 2006)Governments, especially the federal government, are often slow to pay their bills, so businesses frequently have to borrow money to bridge the gap between the delivery of goods and services that must be paid for and the time it takes the government to pay them.

TABLE 4.11
Private businesses owned by minority women, by race/ethnic group, 2004
	2004		Firms owned by women of color
	Firms owned by women of color	Firms owned by all persons of color	Percent change 1997–2004	Percent share of firms owned by all persons of color*
*Groups add to more than 100% because it was possible for a firm to be classified in more than one minority group.
SOURCE: "Majority-Owned, Privately-Held Firms Owned by Women of Color in the U.S., 2004," in Businesses Owned by Women of Color in the United States, 2004: A Fact Sheet, Center for Women's Business Research, 2004, http://www.womensbusinessresearch.org/minority/BusinessesOwnedbyWomenofColorintheUS.pdf (accessed January 9, 2006)
Total U.S.
Number of firms	1,427,820	4,011,663	54.6	35.6
Employment	1,258,710	6,250,182	61.8	20.1
Sales ($000)	146,973,258	901,257,588	73.6	16.3
By race/ethnicity
African American
Number of firms	414,472	1,059,548	32.5	39.1
Employment	253,661	806,465	50.1	31.5
Sales ($000)	19,504,040	95,685,876	43.9	20.4
Asian American & Pacific Islander
Number of firms	419,793	1,264,474	69.3	33.2
Employment	543,888	3,428,057	73.4	15.9
Sales ($000)	69,738,252	493,747,459	83.0	14.1
Hispanic
Number of firms	553,618	1,587,608	63.9	34.9
Employment	320,078	1,731,082	36.4	18.5
Sales ($000)	44,357,758	271,937,779	62.4	16.3
Native American & Alaska Native
Number of firms	90,730	273,266	69.3	33.2
Employment	128,537	464,726	73.4	27.7
Sales ($000)	12,364,531	55,247,294	83.0	22.4

While the U.S. Supreme Court has not yet declared the use of racial classifications unconstitutional, it has ruled them suspect and subject to strict judicial scrutiny. As a result, set-aside programs came under increasing attack in the 1990s and early 2000s.

In 1989 the Supreme Court, in City of Richmond v. Croson County (488 US 469), struck down a Richmond, Virginia, city ordinance that reserved 30% of city-financed construction contracts for minority-owned businesses. The Court ruled that the ordinance violated equal protection because there was no "specific" and "identified" evidence of past discrimination, "public or private," against the Richmond Minority Business Enterprise in city contracting. The majority opinion, written by Justice Sandra Day O'Connor, also noted that the city had failed to "narrowly tailor" the remedy to accomplish any objective other than "outright racial balancing." The opinion further stated that it was a "completely unrealistic" assumption that a 30% assignment to minority business enterprises in a particular trade would be a fair representation of the community.

In a similar case, Adarand Constructors, a white-owned company, sued the government, claiming the company failed to receive a government contract because racial preferences had violated the owner's right to equal protection under the Fifth Amendment. In 1989 the U.S. Department of Transportation awarded a contract for a federal highway project to a construction firm, which in turn subcontracted the job to a Disadvantaged Business Enterprise in compliance with the Subcontractor Compensation Clause. In 1995 the Supreme Court, in Adarand Constructors, Inc. v. Peña (515 US 200), expressed doubt in the validity of the affirmative action programs, based on the Surface Transportation and Uniform Relocation Assistance Act of 1987 (PL 100-17) that channeled $10 billion a year in construction contracts to women- and minority-owned businesses. The court, citing the need for stricter and narrower standards in determining racial preferences when awarding contracts, returned the case to the district court for review.

These Supreme Court decisions have brought many set-aside programs under scrutiny. In June 2000 a federal court in Associated General Contractors of Ohio v. Sandra A. Drabnik decided that the Ohio state program to set-aside 5% of state construction projects for minority-owned businesses was unconstitutional. Even though that court had upheld the state's program in 1983, subsequent U.S. Supreme Court decisions required the federal court to apply a more stringent standard of judicial review, no longer allowing legislatures to use "implicit factfinding of discrimination" to justify racial preferences and affirmative action programs like set-asides.