Despite the increasing diversity in Massachusetts, black and brown business owners are still rare.
Blacks and Latinos now make up more than a fifth of the state’s population, but own just over 3% of the companies with employees – less than half the national ownership rate of blacks and Latinos. This is according to a 2018 US census of entrepreneurs.
When the self-employed are factored in, blacks and Latinos own about 9% of all businesses in the state, also less than half the national average, according to the latest 2012 census survey.
“We are an extraordinary state. We are a rich state. Our numbers should look better than them, ”said Malia Lazu, lecturer at the MIT Sloan School of Management. “Mayors and governors really need to incentivize how people can be held accountable. You need to support the supply side in starting businesses. “
Heads of State are aware of the problem, which is even worse in the construction and design industries. Blacks and Latinos combined own less than 3% of the businesses that are available for often lucrative contracts from public authorities in Massachusetts. This is according to a 2017 disparity survey commissioned by the State Division of Capital Asset Management and Maintenance (DCAMM).
According to DCAMM’s previous disparity report, this is about one percentage point higher than in 2010.
“There isn’t a lot of diversity,” said Lt. Gov. Karyn Polito last year, describing a classroom for contractors in Massachusetts that is being recertified. “I think about that a lot in my work with the governor and why we need to change that.”
Minority business owners and their proponents point to a number of causes for these low ownership rates – from a long-standing racial divide and struggle for bank loans, to meaningful help from government officials responsible for giving minority entrepreneurs more access and opportunities create.
The reports commissioned by DCAMM found a significant discrepancy between the number of minority companies available for work and the percentages actually contracted by government agencies. Governor Charlie Baker made changes to this system last year to make the state’s supplier diversity agency a standalone agency, improve compliance, and increase the level of contracts with minority companies.
Such steps can lead to the growth of minority businesses. Proponents stress that government contracts can become a steady source of income for a small business, leading to more community recruitment and larger projects for the company.
The Massachusetts Business Development Agency provides multi-million dollar grants, loans and technical advice to young small businesses. Massachusetts Growth Capital Corporation, a quasi-public company, spends millions on local community development groups helping small businesses, particularly in the state’s 26 gateway cities, which are often more black and Latino.
However, the state still lacks accurate racial and ethnic data on the business owners receiving this money.
“We need to be more specific about who is actually not being served,” said Orlando Watkins, vice president of programs at the Boston Foundation. “I think the governor is doing some of this and increasing his interest in it. So we have to keep pushing. “
Architect David Lee stood before a renovation project on a brick row house in Roxbury last month and said he could count the number of black-owned construction companies on one hand.
“The fact that you can probably name them all is problematic,” he said.
Government mandates in the 1970s and 80s to get minority-owned companies up and running were effective and enforced, he said. However, the courts lifted the mandates as discriminatory and replaced them with targets to encourage contractors and agencies to hire certain percentages of minority companies for public projects.
Lee said white-owned companies often did what was necessary to achieve these goals.
“I’ve always said, ‘Hire me because I’m a good architect. Do not try to have me provide paper or anything so that you can work out your numbers, ”he said.
Both Baker and Boston Mayor Marty Walsh have been criticized for the very low rates at which their agencies and departments have contracts with minority-owned companies. Last week the GBH News Center for Investigative Reporting received part of the draft Boston City Disparity Study, which found that only 1.2% of the city’s contracts went to black and Latin American companies over a five-year period.
Adrienne Benton, owner of a tech company called Onyx, poses for a photo along Huntington Avenue in Boston on February 10, 2021.
Meredith Nierman / GBH News
Adrienne Benton owns the Boston and Lawrence-based technology company Onyx. She said Boston and state leaders tried to help, but they often create dedicated routes for minority-owned companies that really have nowhere.
“If you present as black or brown, you get sent to that other track,” she said, and that track doesn’t offer any meaningful business. “That doesn’t mean we tip the scales and don’t want to compete. But at the same time, when you’re starting out and getting so far behind in so many different ways and not having access to certain things, it feels like real barriers, real obstacles. “
The biggest barrier for black and Latino small business owners is access to capital to get started or grow. Most black and Latino-run companies are reluctant to apply for credit – and when they do, they have a much higher rejection rate than white male applicants, according to recent Federal Reserve studies.
Benton believes that “unspoken biases” play a big role in the lending process.
“When you turn to a company to get money for an idea you have or your business project, an African American woman presents things with additional challenges,” she said. “If I had the same business proposition I proposed to lenders many years ago, and I looked different, I would probably have been received differently.”
A fundamental problem with access to capital remains the wealth gap that separates blacks and Latinos from whites who have access to more equity – higher income and savings, higher home ownership rates, and relatives with wealth. All of them are ingredients for starting a business.
City Fresh Foods CEO Sheldon Lloyd poses for a photo at the organization’s headquarters in Roxbury, Massachusetts on February 12, 2021
Meredith Nierman / GBH News
A small effort to address this equity issue is taking place at City Fresh Foods in Roxbury, where meals for schools and the elderly are prepared in a large commercial kitchen. The company offered long-term employees – almost everyone of color – the opportunity to be co-owners of the company.
“You have the chance to become a partner. Why not jump in and take that? “said Licinio Montrond, who has been with City Fresh since graduating from high school. He is in the process of buying 80 stocks and is quickly seeing a change in his perspective.
“I see trash and other things differently,” he said. “Now I don’t want to throw my money away, so to speak, because at the end of the day it’s up to me and the rest of the part.” Owners to make sure we make a profit. “
Sheldon Lloyd – one of two African American brothers who started the company in 1994 – said he had long wanted to move to an employee-owned company.
“We all know that there is a huge wealth gap in terms of assets, especially in the color communities. So this is a chance for people to get something, ”he said. “We actually created people here who went out and run their own businesses. It was part of our culture that more would participate and bring us to the promised land. “
The needle moved very slowly on that promise of justice. And the coronavirus pushed the needle back. Some estimate that 40% of black-owned businesses in the US have closed since the pandemic began precisely because so many of them are small and lacking in savings.
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