Black Americans are not afforded the same opportunities as white people, especially when it comes to economic success and career opportunities. Only four of the current Fortune 500 CEOs are Black. None of those four are Black women, in fact, black women are starting small businesses at 4.5 times the rate of all other business owners in the U.S. largely due to significant challenges in the workplace. The median wealth for white families is around $140,000, that is 12 times that for Black families. Even more concerning is that by 2053, the median wealth for Black families is projected to fall to zero.
As of 2018, Black women earned only 61 cents for every dollar earned by white men and women of color are more likely than any other group to experience workplace harassment, racial bias, and lack of advancement. According to a State of Women in Business Report released in 2019 by American Express, the average black woman in business earns an average of $65,000 in revenue, and that number has trended down over the last five years.
What Created The Racial Wealth Gap?
Today’s racial wealth gap in the black community dates back to Jim Crow-era practices like segregated education, redlining, and job discrimination. African Americans were historically blocked from higher-paying jobs and homeowner ownership opportunities and that ultimately prevented wealth building. The 1935 Social Security Act did not afford coverage to domestic and agricultural workers, many of whom were African American, and its requirements for residency and payroll information also excluded a large number of African Americans working menial, “off the books” jobs. This created cyclical poverty in Black America. According to the Pew Institute, children under the age of 18 are the most impoverished age population of Americans and African-American children are almost four times as likely as white children to be in poverty.
So How Can Brands Support Black Businesses, Now?
- Business Education and Supplier Development
Small business ownership is the only way to build true wealth in America. By supporting more Black-owned businesses through education, sponsorship, and supplier development, corporations can create more opportunities for Black business owners and their families. Supplier Diversity is not enough. No one wants to fill out another application online, and never ever get any opportunities. By being more intentional about supporting black business owners, this will allow more members of our community to build savings, acquire a home, build positive credit scores, have better educational opportunities and ultimately create generational wealth. Many Black entrepreneurs start businesses inspired by the richness of African American culture itself–Black-owned clothing stores, hair care and make-up products, and children’s toys while these services are needed in the community, these businesses will not sustain a community. More work must be done to encourage minorities to start businesses that could start high-grow businesses that could scale in areas such as technology, clean energy and regenerative agriculture, but they need investment, mentorship, access to capital and opportunity.
When minority businesses flourish, they hire people from their community. But banks turn down 8,000 loans a day in America, this practice has hindered that prosperity African-Americans and other entrepreneurs of color seeking small business loans. A 2017 study by the National Community Reinvestment Coalition actually found that banks were twice as likely to provide business loans to white applicants than Black ones and three times as likely to have a follow-up meetings with white applicants than more qualified Black ones.
Many African American business owners hire people who look like them. But because they are often forced to fund their own businesses with credit cards and personal funds due to the lack of bank loans or investment capital. This means that most Black-owned businesses don’t make enough money to pay employees, so they pay workers under the table or hire them as contractors at best.
- Review Your Procurement Practices.
Supplier Diversity has been around for over 30 years. How closely is it monitored at your company? How much is your spend with black businesses? Has it increased annually? Track closely direct and indirect spending with the procurement organization. Look at your annual spend internally with Black businesses and track it down to the secondary spend by your largest prime contractors. Also, review the contract terms and payment practices of prime contractors, often then pay minority vendors late and squeeze the margin on the project from the minorities businesses on the team.
- Create Measurable Diversity Programs with Appropriate Budget.
Don’t just make statements in the annual report. Be accountable for your stated diversity policies and goals. Create specific programs to close the racial equality and wealth gap. One great example is JPMorgan Chase Beefs Up Commitment To Build Black Wealth.
- Tie Compensation to Diversity Goals.
Don’t just look at your intern pipeline, hiring, look to retention and promotion goals tie compensation to the success of it. A good example, Uber ties senior executive pay to measurable progress on diversity goals. Blacks leave corporate jobs due to the racial climate and lack of promotion. Also, support and properly fund minority employee affinity groups. People in isolation need support from the company and each other.
- Police Your Environment.
If you want to know how to be an anti-racist, don’t ignore that racist cartoon that gets passed along in email. Be proactive about responding and reporting it. A good example: The company Activision has added additional resources and in-game reporting systems to identify and ban racist language in their online gaming environment.
- Look at the Demographics of Your Board of Directors.
How many minority perspectives are on your Corporate Board of Directors? Public companies wishing to increase their diversity benefit the most by recruit candidates who also help improve cognitive diversity in the boardroom. If all you do it recruit people of color who have fully assimilated with the exact same background as the current board members that will not provide the diversity perspective been sought. Harvard Business Review has some advice on how to accomplish this kind of board diversity.
The Time Is Now.
The success of the black community is important for everyone. Drastic actions are needed to close the racial wealth gap and save the black businesses that are still hanging on. When black-owned businesses have a financial platform to stand on, they are good for business. Be visible with your success story. This can help your buyers get the message internally and your competitors externally may do more with businesses with people of color to keep up. When corporate dollars are used strategically, we will have a more inclusive and racially balanced economy.