The State of Minority- and Women- Owned ... - Cleveland.com

Market-Based Disparities in Business Formation and Business Owner Earnings
African American business formation rate in the CLEVMA that is 60.7 percent lower than the
nonminority male business formation rate (i.e., 4.39 – 11.18 ÷ 11.18 ≈ -60.7%). For Hispanics,
the business formation rate is 47.0 percent lower. For Asians/Pacific Islanders, it is 4.8 percent
lower. For Native Americans, it is 27.5 percent lower. For persons reporting two or more races, it
is 28.6 percent lower. For minorities as a group, it is 50.4 percent lower. For nonminority
women, it is 47.2 percent lower; and for M/WBEs overall, it is 48.2 percent lower.
Table 5.8 provides similar information for the construction sector and the goods and services
sector. Large deficits are observed in construction for all groups except Hispanics and
Asians/Pacific Islanders. With the sole exception of Asians/Pacific Islanders, large deficits are
observed in the goods and services sector as well.
There is no doubt that a portion of the group differences documented in Tables 5.7 and 5.8 are
associated with differences in the distribution of individual productivity characteristics and
preferences between minorities, women, and nonminority males. It is well known, for example,
that earnings tend to increase with age (i.e., labor market experience). It is also true that the
propensity toward self-employment increases with labor market experience. 244 Since most
minority populations in the United States have a lower median age than the nonminority
population, it is important to test whether the disparities in business ownership evidenced in
Tables 5.7 and 5.8 can be explained by differences in the age distribution or other factors such as
education, geographic location, or industry preferences of minorities and nonminority women
compared to nonminority males.
To do this, the remainder of this section presents a series of regression analyses that test whether
large, adverse, and statistically significant race and gender disparities for minorities and women
remain when these other factors are held constant. Table 5.9 focuses on the economy as a whole
and Tables 5.10 and 5.11 focus on the construction sector and the goods and services sector,
respectively. The numbers shown in each of these tables indicate the percentage point difference
between the probability of self-employment for a given race/gender group compared to similarlysituated
nonminority males.
244 Wainwright (2000), p. 86.
NERA Economic Consulting 165