Why is the rate of black business ownership increasing?

In February 2022, slightly more than 1.2 million African Americans were self-employed, up from slightly less than 1.1 million in February 2020. Another study conducted by the website domain company GoDaddy discovered that since the pandemic began, Black owners have accounted for 26% of all websites created for new businesses, up from 15% percent previously.

The gains are larger than those seen in other demographic groups: According to Fairlie’s census data analysis, the number of Black small-business owners was 28% higher in the third quarter of 2021 than it was before the pandemic, compared to 19% for Latino business owners and 5% for white and Asian business owners.

It’s too early to tell how many of these self-employed individuals will go on to start larger businesses and employ others. Economists advise caution when interpreting the data because self-employment includes not only small-business owners but also gig workers such as Uber drivers. Nonetheless, this trend suggests that the lofty promises made by corporations following social justice protests last summer to invest more in the Black community resulted in real, tangible changes.

Walker stated, “Healthy Black businesses are the key to healthy Black communities.”

A Pandemic and a Racial Revival

There are several possible explanations for the rise in Black self-employment. First, prior to the pandemic, African American business ownership was increasing.

Following the coronavirus pandemic, there was a significant increase in the number of small businesses established.

According to nonpartisan data center USAFacts, new business applications increased more in 2020 than they had in the previous 15 years.

“This is not a strange coincidence.” There is a lot of demand for goods and services, and many people are realizing, ‘I can do that without having to work for anyone else,'” said Ron Hetrick, an economist at Emsi Burning Glass.

Hetrick also mentioned that the counties with the highest increases in business formations over the last two years all have significant Black and Hispanic populations: Chicago (Cook County), Detroit (Wayne County), Los Angeles, Houston (Harris County), and Miami-Dade County.

“The good news about this whole thing is that when you see business formations occurring in very ethnically diverse areas, it’s a good sign.”

It Indicates What Is Possible’

Despite these advances, there is still a long way to go. According to one Brookings Institution report, 800,000 more Black-owned employer firms are needed to achieve equity. Furthermore, simply starting a business does not guarantee its long-term viability.

“There are a lot of new businesses popping up, but how do we help them thrive?” Tracey Clark Jeffries, CEO of Capital Consulting Services in St. Louis and a Black business owner herself, was asked.

Jeffries has observed that many businesses in her neighborhood are open – but struggling. She’s heard from restaurant owners on Martin Luther King Jr. Boulevard in St. Louis, for example, that they’re seeing fewer customers as more people work from home.

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