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

Executive Summary
disparity analysis, we enhanced our basic statistical model to test whether minority and female
business owners in the Houston market area differed significantly enough from business owners
elsewhere in the U.S. economy to alter any of our basic conclusions regarding disparity. They
did not.
As was the case for wage and salary earners, minority and female entrepreneurs earned
substantially and significantly less from their efforts than similarly situated nonminority male
entrepreneurs. These disparities are a symptom of discrimination in commercial markets that
directly and adversely affects M/WBEs. Other things equal, if minorities and women cannot earn
remuneration from their entrepreneurial efforts comparable to that of nonminority males, growth
rates will slow, business failure rates will increase, and business formation rates may decrease.
Combined, these phenomena result in lower M/WBE availability levels than would otherwise be
observed in a race- and gender-neutral market area.
Next, we analyzed race and gender disparities in business formation. In many cases we observed
large, adverse, and statistically significant disparities consistent with the presence of
discrimination in these markets in the overall economy, in the construction sector, and in the
goods and services sector. In the construction sector, for example, business formation rates for
nonminority women, were almost 15 percentage points lower than for comparable nonminority
males. Rates for Asians/Pacific Islanders and Native Americans were 6 and 8 percentage points
lower, respectively, than for comparable nonminority males. For African Americans and
Hispanics, however, observed business formation rates were higher. These higher business
formation rates have not, however, translated into higher business owner earnings. The also
appear to be a very recent and possibly transient phenomenon, perhaps related to the recent
financial crisis. 6 In the goods and services sector, business formation rates were lower for
African Americans, Hispanics, and nonminority females, while rates were higher for
Asians/Pacific Islanders and Native Americans. Once again, however, the higher business
formation rates for Asians/Pacific Islanders and Native Americans have not translated into higher
business owner earnings.
Finally, as a further check on the statistical findings in this Chapter, we examined evidence from
the Census Bureau’s 2007 Survey of Business Owners and Self-Employed Persons (SBO), the
most recent data available. 7 These data show large, adverse, and statistically significant
disparities between M/WBEs’ share of overall revenues and their share of overall firms in the
U.S. as a whole, and in the State of Ohio. 8 The size of the disparities facing minority- and
women-owned firms in Ohio is striking. For example, although 2.59 percent of all construction
firms in Ohio are owned by African Americans, they earned only 1.23 percent of all sales and
receipts. Hispanic-owned construction firms are 1.36 percent of all firms in Ohio, yet they earned
only 0.566 percent of all sales and receipts. Asian-owned construction firms are 0.39 percent of
6 A similar regression analysis performed on the 2006-2008 ACS data set, included in our 2010 study for the
Northeast Ohio Regional Sewer District, did not observe this result for African Americans, indicating that it is
due to records from the 2009-2010 time period. See NERA (2010, p. 159).
7 Formerly known as the Survey of Minority- and Women-Owned Business Enterprises (SMWOBE).
8 It is not possible with this particular data source to examine the Cleveland and Akron areas separately from the
rest of Ohio.
NERA Economic Consulting 6