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Black Americans face worsening disparities because of the pandemic; the federal government must intervene | COMMENTARY

A new AP-NORC poll finds that about 4 in 10 Hispanic Americans and 3 in 10 Black Americans say someone in their household was laid off during the pandemic. Only about 2 in 10 white Americans say the same.
A new AP-NORC poll finds that about 4 in 10 Hispanic Americans and 3 in 10 Black Americans say someone in their household was laid off during the pandemic. Only about 2 in 10 white Americans say the same. (Kati Perry/AP)

No segment of the American population has been more negatively impacted by COVID-19 than the Black community. According to Centers for Disease Control data, Black Americans are significantly more likely to be hospitalized and die from the virus, relative to the general population. Among the reasons for this is that Black people tend to live in densely populated urban areas, are less likely to have white collar jobs that can be done remotely and struggle with inadequate health care.

In addition to increased health risks, the Black population has been hit harder economically by the pandemic. The July 2021 U.S. Bureau of Labor Statistics jobs report reported Black unemployment to be 9.4%, compared to white unemployment at 5.4%. Given that nearly 50% of the U.S. population gets health insurance through employers, heightened unemployment is also a health care issue for Black Americans.

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The disparity in unemployment rates accounts for the significant income inequality between Black and white households. The latest available U.S. Census data show that the 2019 median income for Black households is $45,438 with 17.2% making less than $15,000, compared to white households at $72,204 with 7.8% making less than $15,000. Both Black and white households have faced economic hardships as a result of the pandemic, but with Black households starting at a lower base the impact of the pandemic is more severe.

Income allows households to deal with day-to-day expenses, but wealth provides the cushion households need to deal with the unexpected financial pressures of job losses or increasing health care costs created by the pandemic. Black households earn less than two thirds of white households, but have less than 13% of white household wealth. A 2019 Federal Reserve study reported median wealth of Black families to be $24,100 versus white families at $188,200. The pandemic is sure to have reduced both figures as family budgets have been strained.

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What is needed is significant direct investment within Black communities to save Black-owned businesses and spur new venture creation. Entrepreneurship represents a viable alternative to unemployment and/or discrimination in the labor market and can provide a path out of poverty and toward wealth creation. Further, research has found that Black business owners are more likely to hire Black job seekers, than are white business owners.

Given the dire figures above, one would expect increased levels of entrepreneurship within the Black population, but this is not the case. Overall, approximately 12% of white people are self-employed compared to just 4% of Black people, according to my academic research, which also shows that the three-to-one ratio in the self-employment rate between white and Black Americans has remained roughly constant for more than a century. For Black entrepreneurs who do found businesses, they are 43% more likely to close than white-owned businesses.

The problem is unequal access to capital. The lower wealth levels within Black communities limits personal investment in new ventures, and there is a long history of discrimination in lending by banks. More recently, the $500 billion Payroll Protection Program largely ignored Black-owned businesses. Only 12% of Black and Latino-owned businesses that sought assistance from the federal government received the amount they requested, and 41% were denied.

This explains why noted UC Santa Cruz economist Robert Fairlie found a staggering 41% of Black entrepreneurs had to close permanently compared to a 17% drop in the number of white entrepreneurs. The loss of these businesses is particularly devastating to struggling urban communities and is likely to be a major cause of the increased crime we are witnessing in cities across the country.

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The federal government has a moral obligation to improve the lives of all citizens, and failing to address the worsening societal and economic disparities Black citizens must deal with as a result of the pandemic is unacceptable. Unleashing American capitalism and entrepreneurship would spur job creation, increase access to health care and reduce poverty and crime. This could be accomplished by funding business plan competitions at the nation’s Historically Black colleges and Universities. Private sector investment and intellectual capital could also be brought to bear as investors and potential strategic alliance partners may be interested in working with competition winners to tap into new markets. The time is now to invest in the revitalization of Black communities in order to bring hope to millions of Americans who are falling further behind. The longer we delay, the harder (and more expensive) the solutions will be.

Robert P. Singh (robert.singh@morgan.edu) is a professor of management in the Earl G. Graves School of Business and Management at Morgan State University.

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