Sunday, May 01, 2011

Helping African American Businesses in Pittsburgh

Hidden behind the many positive rankings of the Pittsburgh Region is the poor economic condition of the region’s African American population. Census data for 2009 show that southwestern Pennsylvania has the highest rate of poverty for working age African Americans of any major region in the country. More than one of every three African Americans (37%) in our region is poor. That’s nearly quadruple the 10% poverty rate among the white population in Pittsburgh, and double the 19-20% poverty rates among African Americans in regions such as Atlanta, Baltimore, Boston, and Charlotte.

As discussed in a previous post, part of the solution to this persistent problem is improving the performance of our public schools and expanding training and assistance programs for African-Americans. But another important element of a comprehensive solution is increasing the number and size of African American-owned businesses. Black-owned businesses help to bring wealth as well as jobs into the black community, and the leaders of these businesses can help to ensure the region’s economic development strategies support all segments of the community.

How is the Pittsburgh Region doing in creating and expanding African American-owned businesses? Some important insights can be gained from the national Survey of Business Owners which was released earlier this year. The Survey was conducted as part of the 2007 Economic Census.

Based on the Census Bureau’s estimates, there were 6,101 African American-owned firms in the Pittsburgh Region in 2007. That’s the 5th smallest number of black-owned firms among the 38 largest metro regions for which statistics are available.

You might expect there to be relatively few African American businesses here simply because of the small size of the region’s African American population. However, if you adjust for that, we look even worse: Pittsburgh ranks dead last among the largest regions in the ratio of the number of black-owned firms to the number of working-age black residents in the region.

Although we have a relatively small number of black-owned businesses, they are, on average, larger than black-owned businesses in other metro areas in terms of both employees and revenues:

  • Although only 480 (8%) of the 6,101 African American firms in the Pittsburgh Region had any paid employees (the rest were sole proprietorships or partnerships), only eight other regions had a higher proportion of firms with employees.

  • The African American firms in Pittsburgh had more employees than most regions; on average, the businesses with employees here had an average of 10.7 workers, the 12th highest number among the major regions.

  • The African American businesses with employees in Pittsburgh had an average of $1.2 million in annual sales/receipts, the 7th highest average revenues among the 38 largest regions for which these data were available.

Our region has African American-owned businesses in a wide range of industries ranging from construction to finance; the largest concentrations of businesses and workers were in the health and social services sector and the hospitality industry.

We have seen some encouraging signs of growth in African American-owned firms over the past decade:

  • The number of black-owned businesses in our region nearly doubled between 1997 and 2007 (more than 3,000 new firms), although this was a smaller growth rate than in most regions.

  • The number of businesses that had employees declined by 14% (77 fewer firms), but the total number of employees working for these businesses grew by 27% (nearly 1,100 more jobs).

  • Average revenues of black-owned businesses in Pittsburgh grew by only 11% over the decade, but that was the 8th highest growth among the largest regions; in most other regions, average revenues of African American businesses decreased.

The African American business community in the Pittsburgh Region is clearly smaller than it could or should be, but the businesses we do have provide a solid base to build on. What can we do to strengthen our region’s black businesses?

First, we should be proactive in providing technical assistance and seed funding to African American entrepreneurs who are trying to start or grow their businesses. We have many organizations and programs designed to help entrepreneurs and startup businesses, such as the Small Business Development Centers and Innovation Works, but they need to measure and report on how effectively they are reaching the African American community, and establish special outreach programs where appropriate.

Unfortunately, the Pittsburgh Region missed an important opportunity to support minority businesses this spring. At the beginning of April, the U.S. Department of Commerce’s Minority Business Development Agency (MBDA) awarded $7.8 million in funding to 27 MBDA Business Centers across the country to assist minority entrepreneurs, including a new center in Cleveland, but Pittsburgh wasn’t included.

Second, majority-owned businesses in the region need to help African American businesses by seeking them out as suppliers and by providing mentoring and other support. The African American Chamber of Commerce provides an excellent way for majority-owned businesses to find the African American businesses which are located in the region. In addition, the Western Pennsylvania Minority Supplier Developer Council operates programs specifically designed to match minority suppliers with other businesses. Businesses who want to help grow the minority business community should attend WPMSDC’s 35th Annual Business Opportunity Fair in Monroeville on May 4 or participate in its other programs.

(A version of this post appeared as the Regional Insights column in the Sunday, May 1, 2011 Pittsburgh Post-Gazette.)


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