Brookings: Businesses owned by women and minorities have grown. Will COVID-19 undo that?

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This Brookings brief recaps the state of racial and gender equity within business ownership, the challenges that minority- and women-owned business enterprises (MWBEs) faced during the depths of the Great Recession, and how the COVID-19 small business crisis could disproportionately affect MWBEs.

People of color are about 40% of the population, but only 20% of the nation’s 5.6 million business owners with employees. If ownership shares matched population shares, people of color would own 50% more businesses than they currently do now. Similarly, women are 51% of the U.S. population but only 33% of business owners with employees, a disparity ratio of 65%.

MWBEs Were Less Likely To Survive The Great Recession, But Drove The Recovery

Economic shocks such as COVID-19 or the Great Recession have disproportionate impacts across industries, communities and individuals. Brookings examined the outcomes for all businesses owned by women and people of color during the Great Recession.  Small businesses experienced disproportionate job losses during the Great Recession, but the pain was even greater for female- and Black-owned businesses.

Although MWBEs were more likely to shutter during the Great Recession, they helped stabilize the economy during the recovery period. Nationally, MWBEs added 1.8 million jobs from 2007 to 2012, while firms owned by white males lost 800,000 jobs, and firms equally owned by white men and women lost another 1.6 million jobs.

MWBEs Are Most At-Risk From Covid-19, But May Benefit Less From Policy Solutions

After a decade of business ownership gains, the COVID-19 recession has the potential to be disproportionately devastating to MWBEs. Whereas the Great Recession hit manufacturing and construction hard, COVID-19 is putting the food services, retail, and accommodation industries at immediate risk. These businesses in immediate-risk industries have a much higher percentage rate of minority and women ownership. 

Congress’s signature small business relief program for COVID-19—the Paycheck Protection Program—relies on mainstream financial institutions to deliver loans to small businesses. This approach favors existing customers at large banks and may be less relevant to underbanked and unbanked MWBEs.

It’s clear that people of color are underrepresented in entrepreneurship, accounting for only about 30% to 80% of business ownership across the nation. Now, this long-standing crisis is intersecting with the coronavirus-induced small business crisis. As in the aftermath of the Great Recession, the resilience of MWBEs will be fundamental to the nation’s economic recovery, so it is critical for policymakers to maintain their commitments to building more inclusive local economies.

  

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