Minority business economic challenges and opportunities

I opened today’s newspaper to yet more glum unemployment news. On October 22, the chairwoman of the White House Council of Economic Advisors told the Joint Economic Committee of Congress that “unemployment is likely to remain at severely elevated level” through the end of 2010. It appears that the only question now is how high the unemployment rate will go.

At the start of the recession in December 2007, the US unemployment rate was 5% and it grew to 9.7% in August 2009 (according to US Department of Labor’s Bureau of Labor Statistics). It’s now predicted that we’ll reach more than 10% before the end of this year. But we all know that unemployment is not evenly distributed among racial/ethnic groups and people with different levels of education.

The unemployment rate for African Americans, for example, has been above 9.7% since July 2008 and in August 2009 it was 15.1%. The Latino unemployment rate reached 9.7% in January and by August it was 13%.

The unemployment rate for people with less than high school degree has been over 9.7% since August 2008 and reached 15.6% in August 2009. For people with a bachelor’s degree, the unemployment rate peaked in May at 4.8%.

The fact that African American and Latino workers and all people without a college degree have high levels of unemployment are two of the reasons why we at the UW Business and Economic Development Center (BEDC) have a special emphasis on growing businesses that are owned by African Americans and Latinos and why we are excited about the impact that our BEDC Fellows are having on increasing the number of high school students who participate in the Foster School’s Young Executives of Color (YEOC) program run by the Foster School Undergraduate Diversity Services office.

Research over the last 20 years, largely conducted by Timothy Bates and Rob Fairlie, has found that, like white-owned businesses, companies that are owned by African Americans and Latinos tend to employ more people from these racial groups. (Both Bates and Fairlie presented papers at the 2006 and 2008 National Diversity in Business Research Conference hosted by the BEDC.) The BEDC’s success in growing highly successful businesses owned by people of color is helping to open job opportunities for Washington state residents from racial and ethnic groups that have historically high unemployment rates.

At our upcoming Minority Business of the Year Awards banquet we hope to raise at least $25,000 in scholarship funds that we can award to ten BEDC Fellows. I’ll talk more about the incredible work of our BEDC Fellows and the YEOC program in my next post.

By Michael Verchot, director of the UW Business and Economic Development Center