Black unemployment in the multiracial small business industry
Black unemployment in the multiracial small business industry
Tamara K. Nopper
January 13, 2011
A while back, my colleague, an African American college professor, and I were discussing Black unemployment in conversation with one of my areas of research, immigrant and minority-owned business. She recounted a recent visit to a Dunkin’ Donuts in which she was pleasantly surprised to encounter a middle-aged African American man working at the store. As she described, she pointed to this man as she thanked the manager of the store, a South Asian American, “for hiring him.” When I asked what the manager’s reaction was, she told me he beamed instantly in response as if he was paid the highest compliment. She also mentioned that the African American worker later whispered to her the same reply as expressed by his manager—“thank you.”
This story may seem odd for several reasons. For one, it is difficult to imagine a white person walking into a business and thanking a manager (of any race) for hiring a fellow white person. Second, when conversations about race and employment are discussed, a job working at Dunkin’ Donuts is not generally treated as the ideal opportunity by policy makers and advocates. But let’s consider the significance of this story in relation to several issues: the crisis of Black unemployment, the increasing reliance on small business as a source of employment, and the growing number of non-Black people of color and immigrants in positions to hire employees in small firms.
The crisis of Black unemployment
Among the “civilian non-institutional population,” or those 16 years of age and older residing in the United States and who are not housed in penal, mental, or aging facilities or on active duty in the military, the Black unemployment rate (not seasonally adjusted) as of December 2010 is 15.2 percent whereas for whites and Asian Americans it is 8.3 percent and 7.2 percent, respectively.
Some may attribute the higher rate of Black unemployment to the recession. Others refute this explanation by drawing attention to how “labor market distress…among Black workers has been at catastrophic levels for decades.” While “the highest employment rate for African Americans on record was in 2000,” the recency of this all-time high should not be taken as a sign of growing equality. Allegretto and Pitts point out, “In the tough labor market of today, about one out every four Black workers is underemployed, but even in good times the ratio was one in seven.” The crisis of Black unemployment, as Allegretto and Pitts explicate, is even more catastrophic when other measures of employment status are taken into account:
The hardship caused by this prolonged recession is not fully captured by the official unemployment rate. A more comprehensive account of economic stress for workers is what the Bureau of Labor Statistics calls the U6—which is a broader measure of labor underutilization. The U6 or underemployment includes the officially unemployed along with discouraged and marginally attached workers who have fallen out of the labor force and those working part-time because they can not find full-time work. By this measure, the situation in the Black community is dire. The Black underemployment rate went from 14.4% at the beginning of the recession and is now 23.6% just off a recent high, in June 2010, of 25.0%.
In other words, the issue of Black unemployment is not new and cannot be dismissed as specific to the current economic recession. Many, particularly African Americans, have raised this point so as to counter both colorblind accounts of the recession’s economic impact and assertions of post-racialism after the presidential election of Barack Obama. More, scholars have challenged conventional explanations and approaches for dealing with racial economic inequality as it relates to Black unemployment, including “the ambiguous (and overstated) relationship between social capital and ghetto underemployment” and the championing of education, as opposed to job creation, as the key to ameliorating Black poverty. And popular publications have explored the difficulty of college-educated African Americans from getting hired or even garnering an interview in the professional world.
All of these issues are of course important to conversations about race, un/employment, and the enduring color line. Yet a few interrelated issues remain under-discussed and under-studied when it comes to Black unemployment: the growing significance of small businesses as a source of employment and how racial disparities in business ownership may inform Black unemployment rates.
Small business as source of employment
Small business, according to the Small Business Administration (SBA), the only federal government agency dedicated solely to small business development, is measured for research purpose as “independent business having fewer than 500 employees.” Future research might consider how such an expansive definition, which informs the work of government agencies dedicated to business development, benefits wealthier small businesses more than others. For now we can consider how, according to this definition, there are more employer businesses in the United States characterized as small (having more than 10 but less than 500 employees) than large. Indeed, data indicates that the overwhelming majority of businesses in the United States are actually characterized as micro, or having less 10 employees.
Nevertheless, small businesses, as reported by the SBA, “create most of the nation’s new jobs, employ about half of the nation’s private sector work force, and provide half of the nation’s nonfarm, private real gross domestic product (GDP).” Thus the recession’s impact on small business owners also has implications for employment rates. The SBA reports, “More than half of the 763,000 jobs lost in the first two quarters of 2008 were lost in small firms, and unincorporated self-employment fell from an average of 10.4 million in 2007 to an average of 10.1 million in 2008—9.6 million by November and December.”
There are of course different types of jobs available in small and micro firms. Some may be considered “professional jobs” that many college-educated applicants may seek out. For example, when I worked as an international business consultant, many of the companies for whom I researched and wrote reports were established and run by people with business degrees or who had engineering or medical backgrounds; these companies had the money to enter into the international market and they hired mainly the college-educated, particularly those with business or finance backgrounds. Yet many jobs in the small business sector, including franchise businesses such as a Dunkin’ Donuts, are being sought out by those without college degrees, certifications, technical skill, or work experience—or at least don’t require these to perform the tasks associated with certain jobs. This is notably the case in many examples of service work. Despite the tendency, common among many of the college students whom I teach, to correlate age and job type—where some forms of service work, such as working in a restaurant or being a janitor, is the domain of young people before they graduate from college and get a “real job”—many people of all ages and increasingly different educational backgrounds are employed for the long-term in service work, which now “props up” the U.S. job market.
The growing significance of the small business market for job seekers means that we need to consider how patterns of this industry may relate to the crisis of Black unemployment. In the next sections, I consider two such patterns: racial disparities in business ownership and hiring practices of minority and immigrant-owned businesses.
Disparities in business ownership
As previously mentioned, the majority of businesses in the United States would be first characterized as micro and then small. The Survey of Business Owners (SBO)—administered every five years by the U.S. Census Bureau—found relative parity, in 2002, among racial groups in terms of the percentage of employer firms that were micro, or had less than 10 employees. About 80 percent of white-owned employer firms were micro whereas 85 percent of those owned by Blacks were. For both Asian American-owned and Hispanic-owned employer firms, 84 percent were micro. The Census Bureau, while releasing some of the data from the 2007 SBO, has not yet made available all of the data regarding the employer size of firms among racial groups as it tends to take several years after the survey is administered for findings to fully become public.
What 2007 data is available shows much greater racial disparities in patterns of business ownership than may be gleaned from the relatively similar percentages of micro employer firms among racial groups. Regarding all nonfarm firms (with or without employees), whites owned 83 percent whereas Blacks, Asian Americans, and Hispanics of any race owned about 7 percent, 6 percent, and 8 percent, respectively. Whites owned 81 percent of all firms with paid employees, whereas Blacks, Asian Americans, and Hispanics of any race owned 2 percent, 7 percent, and 4 percent, respectively. The total payroll for white-owned firms was $1.9 trillion, and for firms owned by Blacks, Asian Americans, and Hispanics of any race, it was $23.9 billion, $82 billion, and $54.7 billion, respectively.
Part of the disparity in annual and average payrolls has to do with differences in the sales, receipts, and value of shipments. Among firms with paid employees, racial differences in this area are striking: white-owned businesses have $9.4 trillion and firms owned by Blacks, Asian Americans, and Hispanics of any race have $98.8 billion, $461 billion, and about $275 billion, respectively. This disparity may also partially explain other differences, such as the average annual pay per employee. White-owned firms employ a reported 53 million employees earning an average of $34,843. Of course, around $35,000 is not a lot for a person to make. Yet out of all racial groups, white-owned firms have the highest amount of average pay per employee; workers in businesses owned by Blacks, Asian Americans, and Hispanics of any race earn an average amount of $25,971, $28,650, and $28,267. While the average amounts earned by employees working in businesses owned by non-whites fall in the same range, African Americans, notably have the lowest amount. Indeed, out of all racial or ethnic groups, including those in the category of Native Hawaiian and other Pacific Islander and American Indian or Alaska Native, employees of Black-owned firms earn the lowest average amount.
Additionally, the number of employees in employer firms differs by the racial background of the owner. With 53 million employees, white-owned businesses provide jobs to about 45% of the 118 million employees counted by all employer firms. Conversely, firms owned by Blacks reported about 920,000 employees whereas those owned by Asian Americans and Hispanics of any race reported 2.9 million, and 1.9 million respectively. Stated another way, Black-owned employer firms only employ 2 percent of the people working in businesses owned by whites, African Americans, Asian Americans, and Hispanics of any race.
Race and hiring patterns among non-Black people of color and immigrants
One reason why these racial disparities in business ownership matter is because studies show that African Americans are often considered the least desirable workers by business owners and managers. In many cases, employers often express more interest or satisfaction in other non-white groups, including those with an immigrant background, thereby reinforcing what W.E.B. Du Bois once described as “the color line within the color line.” Employers often associate African Americans with pejoratives such as being lazy, criminal, complaining, and expecting too many rights (as if this is a bad thing). Conversely, other non-white groups, such as Asian Americans and Latinos, are considered hard-working, disciplined, easy to deal with, and perhaps most importantly, grateful.
Some, such as sociologist William Julius Wilson, have reified rather than challenged these employer perspectives by calling for African Americans to develop “soft skills”—disposition, work ethic, and ability to communicate with clientele—to combat Black joblessness. While I have encountered plenty of rude African American workers, the emphasis on communication skills as a factor in Black unemployment is striking since it begs two questions. One is, why is there a relatively lower unemployment rate among whites when many of them are incompetent, do their jobs poorly, and in the case of retail, treat many customers, particularly non-whites, with utter disdain? The other is, how do immigrants demonstrate communicative soft skills among diverse customers when many of them speak limited English and sometimes are rude as hell?
Whatever the case, the bulk of the studies investigating the soft skills thesis as well as employers’ racial perceptions and hiring patterns have included samples of either racially unspecified employers (whom we can presume to be white) or those primarily comprised of white and Black respondents. The focus on white employers makes some sense given that whites own about 80 percent of the businesses that have paid employees and my emphasis here on minority-owned and immigrant-owned enterprises is not meant to suggest we should cease being critical of the role white employers play in unemployment patterns among all non-white groups and African Americans specifically. Yet the growing number of minority-owned businesses necessitates more studies examining the racial perceptions and hiring practices of non-Black people of color. There are of course, some exceptions, such as an article recently published in the Journal of Labor Economics that examines the linkage between the race of managers and the race of the workforce:
Using more than two years of personnel data from a large U.S. retail chain, the study found that when a black manager in a typical store is replaced by a white, Asian or Hispanic manager, the share of newly hired blacks falls from 21 to 17 percent, and the share of whites hired rises from 60 to 64 percent. The effect is even stronger for stores located in the South, where the replacement of a black manager causes the share of newly hired blacks to fall from 29 to 21 percent. In locations with large Hispanic populations, Hispanics hire more Hispanics and fewer whites than white managers.
While this study examines the hiring practices of those working for a large retail chain, we may also consider how such dynamics may operate in the small business retail sector, including those owned by ethnic or racial minorities. In her examination of the hiring patterns of 75 white Jewish, Korean American, and Black merchants in predominantly Black areas of New York City and Philadelphia, sociologist Jennifer Lee found that in the latter city, merchants, including African Americans who had immigrant backgrounds, tended to prefer Black immigrants to African Americans.
Despite these, and a few other studies, little research in the area of immigrant entrepreneurship, as opposed to the literature explicitly studying Black joblessness and race and hiring, has critically examined the racial hiring preferences of immigrant and non-Black people of color entrepreneurs, a noticeable absence given that immigrants own about 11 percent of businesses with employees and that firms owned by Asian Americans and Latino/as employ over three times and two times the number of employees, respectively, than firms owned by African Americans.
I raised these issues in a class I recently taught that explored the relationship between globalization and immigrant and minority-owned business. When examining theoretical debates about immigrant businesses as a source of jobs, I pointed out a limitation of the literature: although it explores whether jobs in immigrant-owned firms are exploitative or a step ladder to managerial positions or entrepreneurship, most studies do not discuss hiring discrimination among immigrant (of color) entrepreneurs. Indeed, the word discrimination doesn’t come up much in the immigrant entrepreneurship literature as more benign terms such as “networks” or “kin” are used. I asked my students if we should consider some of the practices labeled as networking to be indicative of discrimination? My students seemed perplexed, perhaps because the concept of networking has become so hegemonic to the point where the inherent selectivity in the process is often not considered, thereby making it unlikely that some will call it discriminatory. Additionally, unlike the urban studies and race and poverty literature which explicitly investigates employers’ racial perceptions of workers and applicants, the immigrant entrepreneurship literature provides few clues for how to deal with questions of discrimination.
In trying to propose solutions to the issue of unfair hiring, one student argued that the most qualified person should be hired. I asked the class, what do we do in the situation where resumes don’t apply, as in the case of many small businesses, or in which people are competing for jobs that aren’t normally associated with high or middle skills, such as mopping floors or washing dishes or making coffee? Many of my students seemed stumped, perhaps because many of them have not, as they shared, either worked in a service job or come from families who make a living doing so.
I shared several anecdotes with my class so as to engage the limitations of the immigrant entrepreneurship literature. For example, I mentioned how some small businesses may have a following among African Americans but never hire Blacks. I described how a popular Greek-owned pizza shop near where I live has many African American customers but I have never seen one Black person working there (the kitchen is an open one) but they hire different Latino ethnic groups, Arab Americans, Asian Americans, and whites. Another story I recounted was about the time I once asked the owner of a popular Middle Eastern restaurant in downtown Philadelphia that I frequented if he would be open to hiring someone I knew and who I strongly recommended. When I said the name of the man who I suggested, he nodded and told me to bring him in and that he would hire him or get him a job in one of his friends’ businesses. But when I brought the man, an African American with an “Arab-sounding name” to the restaurant, the Lebanese business owner never followed through in helping get him the job that he had, a week earlier, told me was available. All of this when the applicant had work experience in restaurants and was earning a college degree, in other words, he had the criteria of which the absence of purportedly hurts Black applicants’ chances of being hired. The restaurant, while serving good food, is known for their terrible service, provided by both Middle Eastern and white young men and women. A few Middle Easterners and Latinos cook in the kitchen.
I also mentioned to my students how this racial exclusivity may even occur among businesses that are considered “progressive,” as in the case of an African-owned coffee shop in a primarily Black residential area in Philadelphia which has become the hub of progressives with customers running the gamut from white anarchists, African Americans, and non-Black people of color. Yet in all of the times I have been there (over several years and at different days and times) I have never seen African Americans working—only whites, Africans, and Latinos. I also pointed out that in some cases, small businesses can hire Black employees and still segregate them in ways that are consistent with negative stereotypes of African Americans, as seen at a breakfast restaurant in North Philadelphia that I have frequented since I arrived in Philadelphia. While the store is Korean immigrant-owned, the staff is all Black and Latino/a, an anomaly for an Asian-owned business. Yet the owners, a hetero-married couple, are the only ones who are permitted to touch the cash register or conduct financial transactions with customers, who, before the full-scale gentrification of the neighborhood, were primarily Black. The Black staff, who spoke fluent English, were required to bring the bill and the money to the cash register while customers waited patiently for the Korean owners—who were not proficient in English, including the urban slang spoken among some of the customers—to interpret the bill and open the cash register.
As I emphasized to the class, the types of small businesses commonly owned by immigrant entrepreneurs—restaurants, coffee shops, clothing stores, hair stores, delis, bodegas, small groceries, dollar stores, franchise restaurants, etc.—most likely involve applicants being seen by either the business owner, the manager, or other staff members when they are submitting their application or inquiring about job openings. Put simply the applicants’ race may be more readily viewed and thus may not be as easily concealed by processes that may help increase the chances of being called for an interview (but not necessarily hired) such as “whitening the resume,” i.e., removing indicators of one’s ethnic or racial background in an effort to make one’s resume more “universal.” I told my students another story, which did not include an immigrant entrepreneur but did exemplify my point: while in college I worked at an independently-owned fast food restaurant at the mall in my hometown. The then (longtime) manager is a white man. He loved listening to hard core rap and dated a Black woman. Some of my co-workers were African American, two of whom were on welfare. One of them struggled with a drug addiction, as did some of my white co-workers (I remember someone pointing out that one white male worker was always wearing long-sleeve shirts—even in the summer—under his uniform shirt, to cover up signs of his heroin habit). Despite the diversity of the staff and the range of problems that all racial groups had, I was told by the white manager to tell him the race of the applicant when I gave him an application submitted by a shopper at the mall. Someone non-Black mentioned that customers were concerned there were too many Black workers at the restaurant. At the time, there were only about four Black workers out of a staff of ten.
I raised these stories of Black employment in my class so as to critically engage some of the limitations in the existing immigrant entrepreneurship literature. A few students expressed disinterest or annoyance at my anecdotes. Indeed, one white student in the class seemed particularly bothered, not by the content of my stories it seemed, but rather with me telling them. She demanded that I provide national data to demonstrate my points and then was upset when I could not.
While we can wonder whether the demand for national data came from a hostile place, the request is intellectually intriguing. It is also highly unlikely to be met anytime soon. According to law professor Tanya Hernandez, the Equal Employment Opportunity Commission (EEOC) focuses on employers as opposed to individual workers and thus does not collect data on the racial background of perpetrators of racial discrimination or harassment on the job. While the groundbreaking Multi-city Study of Urban Inequality explored some of the issues I raised, I know of no national survey conducted by the U.S. Census Bureau, the Department of Labor, or the Department of Justice that has asked entrepreneurs or managers about their racial views of applicants and employees or what racial treatment people receive on the job if hired.
While I doubt a national survey will ever be taken by the federal government, we can consider why there isn’t more research as well as public debate regarding Black unemployment in the multiracial small business industry in which an increasing number of non-Black people of color and immigrants have the potential to hire staff. While the issue of racial discrimination and hiring has been largely covered, the immigrant entrepreneurship literature, with few exceptions, has yet to fully address this issue. I don’t know why this is but I wonder if the absence may be related to two dynamics. One being the tendency to valorize immigrant-owned businesses as evidence of immigrants’ belief in the American dream of social mobility through hard work and discipline—a characterization that has made it difficult for people, from academics to customers to advocates, to raise critical questions about the racial perceptions and behavior of immigrant entrepreneurs. The other is the tendency to associate small businesses, particularly those with a small staff or owned by immigrants, with networking, kinship, and family labor, which often results in a lack of scrutiny about hiring processes. Many immigrants of color actually hire non-family labor but the unfortunate tendency to assume that some immigrants of color, such as Asians, “look alike” may influence people’s perceptions that workers are biologically related. More, the common employment of Latino/a immigrants, particularly Latino men, in small businesses suggests that we can’t assume every worker is related to the owner unless we simply believe that whites, Arab Americans, Asian Americans, and Blacks (including those who are African American or Caribbean or African nationals), all have a Latino/a cousin or two they’ve decided to employ. Whatever the case, the academic literature, as well as the general public, has tended to give small mom and pop stores, including those owned by whites, as well as immigrant-owned businesses in particular, a free pass when it comes to not hiring African Americans.
Additionally, we can consider what role the “diversity defense” plays in subverting critical questions of the hiring practices of small businesses. As Hernandez describes, the diversity defense involves “the way in which legal actors view a racially ‘diverse’ workplace as the equivalent of a racially harmonious workplace,” “lack of judicial knowledge about non-White racial hierarchies generally,” and “viewing all people of color as the same and overlooking the particular histories of racial animus within and across different ethnic groups,” which “can cause a perceived equivalence of workplace diversity and racial harmony.” While Hernandez is preoccupied with discrimination law, her diversity defense framework is relevant for my emphasis on Black unemployment in the multiracial small business industry. How might anti-Black discrimination against African American applicants and workers be obscured by a non-white, i.e., “diverse” staff? In other words, if Asian Americans or Latino/as or Black immigrants are seen working in a small business (owned by any race), are questions about the absence or segregation of African American staff off the table?
Oddly, academics have actually addressed the diversity defense more than progressive activists of color. I say oddly since I have found that academics are usually behind activists when it comes to identifying social dynamics to investigate. While the scholarship doesn’t always use the phrase “diversity defense,” there is a good deal of literature examining how employers prefer non-Black people of color over Black workers and use this diversity to conceal and defend their anti-Black racism. Progressive activists of color, including those with access to the media, tend to not raise the issue of Black unemployment as it relates to the hiring practices of immigrants and people of color, perhaps because it troubles the demand for multiracial coalition. Whatever the case, it is noticeable that when it comes to the issue of Black unemployment, the academic literature, even with its limitations, is actually more willing to critically engage the topic of Black unemployment in relation to non-Black people of color than many progressive activists.