African American and Business

Black Women: Diversity and Inclusion Programs - Are they really assisting? In the last few decades, researchers, policymakers, economic development experts, and analysts of public policy are increasingly concentrating on the aspect of entrepreneurship in the African-American community, with respect to devising distinct strategies for facilitating economic success. Establishment of set-aside initiatives for minorities (or disadvantaged business initiatives) is one political strategy which serves as an instrument for enhancing small, poor businesses' chances of survival. Several of these businesses were African-American-owned and -run businesses (House-Soremekun, 2007; Chatterji, Chay & Fairlie, 2013).

This paper will look into the economics-politics interrelationship, by analyzing the aforementioned disadvantaged business initiatives' effect on African-American businesswomen's economic outcomes.

The research question that this paper poses is: Are the programs (such as the set-aside initiatives) that are designed to support small and disadvantaged (or minority) business owners really successful -- or do they rather perpetuate inequality in the system? The reason this question is important is because it focuses on a real problem that researchers have exposed -- namely, the that even though African-American women are increasingly employed in the business sector, very few are business owners or shareholders.

Yet federal initiatives have been developed for decades that are meant to encourage women to become business leaders. However, as researchers have noted in the past, there is a "frontier myth" that exists in the business world in America and the hero of that myth is the "romanticized cowboy" -- the African-American, much less the African-American woman, does not fit neatly into that narrative (Miller, 2004, p. 47).

The study will examine the experiences of African-American women as small business owners in the city of Cleveland, OH, in order to address this question. The study will conclude by addressing the findings and discussing what it means that African-American women are both encouraged to take ownership and yet at the same discouraged by an inherently bipolar system that strives towards two opposing goals at once.

Policy Background (IN THIS SECTION -- HISTORY OF GREAT DEPRESSION -- READ "WHEN AFFIRMATIVE ACTION WAS WHITE" AND ALSO GIVE PERSPECTIVE FROM THAT ANGLE) Set-aside initiatives for minorities first developed during the 1930s, with President Roosevelt's Great-Depression-era New Deal initiatives for addressing economic issues (House-Soremekun, 2007). The 1933 Unemployment Relief Act prohibited discrimination against people on the basis of color, creed or race.

Requirements were stipulated, making it compulsory for companies that received federal governmental contracts in metropolises inhabited by a large share of Black people to employ a particular percentage of Blacks. The primary focus of the SBA (Small Business Administration), instituted in 1953, was small-sized largely-White American businesses, rather than exclusively minority businesses. This body grew continually until, in the year 1958, it permanently became a federal agency (Chatterji et al., 2013).

In this era, a key area of focus was: offering loans as economic aid to small enterprises, in addition to aiding them with federal contract receipt. President Nixon's Executive Order (EO 11458) of March 1969 offered the basis for establishing a national-level initiative to assist minority entrepreneurs (Chatterji et al., 2013). The U.S. commerce secretary was assigned the responsibility of overseeing this program, for developing local-, state- and federal- level processes and facilitating long-term growth of minority companies.

Therefore, innumerable federal department heads had to present reports detailing the strategy they will adopt for attaining positive outcomes, to the commerce secretary. The result was the Minority Business Enterprise Office's establishment. As Katznelson (2005) shows, the U.S. Supreme Court has had a history of interpreting the "set-aside" program of the federal government in disparate ways, and its attempts to explain it in view of the Constitution and/or codes of its own devising have caused the waters of the affirmative action movement to become muddied.

At bottom, Katznelson (2005) indicates that the affirmative action policy of the federal government is only one aspect of the government's approach to minorities -- and the government is more than capable of exhibiting many faces. With the 1980 Fullilove v. Klutznick case (448 U.S. 448), for instance, the Court ruled in favor of the federal government's "10% set-aside program to aid minority business enterprise" (Katznelson, 2005, p. 219). Yet less than a decade later, the Court would offer up a different take on the issue. The 1989 ruling in City of Richmond v. J. A.

Croson Co. (488 U.S. 469) was viewed as a step back for affirmative action because the Court here rejected "a minority set-aside program in Richmond, Virginia, as not meeting" the Court's test for providing "convincing evidence of prior discrimination" (Katznelson, 2005, p. 220). In other words, the set-aside program was not to be implemented across the board -- but only in specific cases where strict criteria were met.

Part of the reason for these differing faces is found in the composition of the Court itself, which like federal government administrations and Congresses is constantly prone to change. For example, Justice Kennedy replaced Powell, which altered the dynamic of the Court. Yet, other political and socials factors were present as well.

The 1980s were a time when Reaganomics was moving American in a new direction -- back to a "club rule" type of democracy -- and Court rulings allowed for more restrictions to be placed on affirmative action programs and for more "aggrieved whites to challenge existing programs" (Katznelson, 2005, p. 220).

Thus, what was meant to be a policy to assist marginalized minorities in the business world had, by the 1980s, become a politicized issue where the original intent was no longer viewed with the same importance by the leading authority figures of the time. By the 1990s, the issue of affirmative action had returned to the fore under the Clinton Administration, and the concept of political correctness was becoming popular.

A somewhat more liberal Court allowed that "the unhappy persistence of both the practice and lingering effects of racial discrimination against minority groups in this country is an unfortunate reality, and government is not disqualified from acting in response to it" (Katznelson, 2005, p. 220). The battle between right and left, liberal and conservative, racism and responsibility, continued to wage. Under this battle lay an even more important question, however: how to adequately address the issue of inequality and racism? The set-aside initiative was supposed to be the answer.

Set-aside initiatives are of two kinds. One entails allotment of a specific dollar value or share of total governmental contracts to minority contractors. The other involves allotment of a specific share of governmental contracts to suppliers and subcontractors from minority communities, by prime contractors (Rice, 1991; Myers, 1997). Percentage goals are different for different schemes, and even occasionally within schemes in case of different purchases (e.g., construction contracts, professional services, and services and goods procurement). MBELDEF's (1988) information on local-level set-aside initiatives suggest that percentage goals vary from 1%-50%.

The percentage goal of a majority of initiatives lies between 5 and 15%. These initiatives are typically supplemented with procurement officers offering additional general support to minority business owners (Bates and Williams, 1993). Problem Statement Over time, minority businessmen have been granted several billion dollars' worth of contracts (Boston, 1999). With the enactment of the 1977 Public Works Employment Act and the 1978 Omnibus Small Business Act, practical goals pertaining to procuring contracts and dollars for minority companies could be established (House-Soremekun, 2007).

But in spite of the big money involved, astonishingly little quantitative proof is seen with regard to their impacts, particularly on minority enterprises' formation. This has resulted in a political and legal dispute in relation to these initiatives. Research Questions 1. Have businesspersons enrolled in, or profiting from, set-aside initiatives for minorities enjoyed more success compared to nonparticipating minority businesspersons? 2. Have businesspersons belonging to particular kinds of industry participated more in such initiatives? 3. Should better-educated businesspersons enroll more in such initiatives? 4.

Should well-established and older businesspersons enroll more in such initiatives? Research Significance This research is especially imperative, owing to recent challenges, on local as well as national levels, against policies for affirmative action, and set-aside initiatives for minorities (by extension). This research will offer a legal and historical perspective on the present debate pertaining to minority set-aside initiatives' survival. Additionally, it will explore their empirical effects on Black businesswomen and will contribute to existing literature on the subject, thereby contributing to decision-making in regard to the future of these programs.

Finally, this study forms a central aspect of my studies. I will be able to complete this course successfully through the successful completion of a number of academic activities and assessments, including this research work. Literature Review Chan and Myers (1996) explore construction contract and public procurement award to non-minority and minority businesspersons prior to, during, and following the execution of the set-aside initiative of New Jersey. The authors discovered that receipt of contracts by minority businesspersons and minority bidders, increased in number. A growth was also witnessed in contract volume.

Boston (1999) revealed that participation of minorities in Atlanta government contracts increased from 0.13% (1973) to more than 38% (1978), following set-asides' implementation in the year 1975. In the next decade, Atlanta's minority-owned companies received 191 million dollars or 15% of the overall value of total contracts awarded. Black business owners in Atlanta were also awarded 72 million dollars of the total 163 million dollars in subcontracts, from 1992 to 1995. Available literature offers scant evidence regarding the natural issue of whether or not set-aside initiatives affected the number of companies with owners hailing from minority backgrounds.

Boston (1998) utilizes information published from the SMOBE (Survey of Minority-Owned Business Enterprises) for contrasting growth rate of the number of firms owned by Blacks in cities which put affirmative action initiatives into operation during the 80s, compared to cities which didn't. He reported a 65% growth in Black-owned enterprises in the former cities and a 61% growth in the latter, between 1982 and 1992; the difference between the cities is statistically insignificant. MBELDEF (1988) offers information on cities and dates of program enactment.

SMOBE data does not, unfortunately, offer any information on White-owned companies' growth rates in either cluster of cities. Williams and Bates (1993) discovered that, from 1982 to 1987, Black companies grew in number and their overall sales increased more among cities that had Black mayors, as compared to cities that didn't. They assert that Black mayor influences are partially because of their promotion of set-aside initiatives for minorities.

Using the JCPES' (Joint Center for Political and Economic Studies) (1994) information regarding set-aside initiatives in twenty-eight cities, William and Bates (1995) looked into whether or not preferential procurement initiative characteristics impact minority-owned enterprises' survival. They conclude that survival rates are higher in case of minority companies for which 1-24% of sales are accounted for by local and state governmental organizations in cities having programs with particular characteristics in place. Mixed results are obtained for minority companies deriving no less than 25% of sales from local and state governments.

Inconclusive evidence exists, with regard to whether or not set-aside initiatives have brought about an increase in number of enterprises owned by minorities. Additionally, no research is found on these initiatives impacts on employment rates in the Black population. This paper attempts at examining the effects (or lack thereof), of the 80's set-aside initiatives implemented in cities, on business ownership in black females and rates of employment, thereby addressing such literature gaps.

Fernandez, Malatesta and Smith (2013) conducted research on the relationship between race, gender and the issuance of government contracts: their study showed that set-aside programs like the Small Disadvantaged Business and Women-Owned Small Business programs did increase the amount of money set aside for and awarded to businesses owned by minorities. However, the study also indicates that the programs give no sign of actually providing "substantive benefits" to minority business owners (Fernandez et al., 2013, p. 109).

The researchers found that the set-aside programs effectively place a limit on how many contracts minority-owned businesses may receive within the overall "system" of doling out federal contracts. The programs act as a "quota" that must be filled -- and beyond that the federal government is not required to provide a second look to minority-owned businesses, and thus an inherently racist flaw subsists in the federal policy that is supposed to promote equality.

Instead of promoting equality in industry, such programs actually undermine equality by essentially stipulating the exact proportion of contracts that may be awarded to minority-owned businesses. With such policies, racism and inequality are subtly reinforced according to the researchers' findings. Johnson (2002) shows that federal courts have acted too quickly in adopting laws that are supposed to help minority-business owners: in their eagerness to "do something" they neglect the subtle implications of implementing a policy that could actually reinforce inequality rather than reduce it.

Johnson's (2002) study focused on the history of legislation and the importance of having legislators who take the time to adequately examine the issue of racism in the business world, what its scope and parameters consist of, and what the evidence tells. Johnson (2002) notes that "excluding post-enactment evidence while giving a governmental entity a limited affirmative defense is the best way to encourage limited use of racial classifications to combat racial discrimination, while providing governmental entities the 'safe harbor' from liability necessary to carefully craft constitutionally satisfactory programs" (p. 328-329).

This finding indicates that too many programs are initiated to address issues -- yet their construction is insufficient and inadequate to address effectively and efficiently the issues they are meant to address. Moreover, the federal legislators are enabled, by passing such laws, to suggest to their constituents that they have taken action and that satisfactory laws have been issued.

This type of superficial redress is what sits at the heart of the set-aside program and, as Johnson (2002) shows through extensive analysis of numerous laws over the course of many decades, the government is less concerned with issuing effective legislation than it is with conveying a sense of activity to the public.

Finally, Miller's (2004) analysis of the oil industry and subsequent identification of it as a "gendered organization" indicates that the business world is still very much an uneven playing field where a select group -- namely white males -- are committed to a "club rule" type of operation and put up a face of supporting and promoting diversity and equality while actually undermining such notions on every level. Miller's (2004) qualitative assessment of women's experiences in the industry reveal "three primary processes" that enable the white male to dominate the sector (p. 47).

The processes identified by Miller (2004) consists of daily interactions among white male role-players in the industry -- a process by which women and minorities are excluded; the value formulation within the industry, which promotes a white masculine environment; and the use of symbols of power that generate an ideal towards which participants in the industry are expected to strive in order to obtain influence -- namely, the ideal of the white cowboy on the frontier.

Women in this environment are expected to accept these processes without question or be shut out from the industry altogether. Miller's interviews with women in the industry provide qualitative data that supports the notion that the set-aside programs are failing to meet objectives, as they do nothing to address issues of inequality, racism and sexism. They act, essentially, as a financial band-aid on an issue that continues to fester under the surface. Methodology A case study approach has been chosen.

This study will analyze African-American businesswomen in Ohio's Cleveland city and eastern suburbs, between September and October 2016. The reason for choosing Cleveland as the study's setting is the large urban city's substantial population of African-Americans. This research will concentrate on small enterprises which aren't leading units in their industry (Bardic, 2011; Clemons and Mcbeth, 2009).

Criteria for labeling a business as 'small' include: relatively small initial owner investment; no more than 500 workers employed; usual annual profits amounting to below 100,000 dollars (however, there is a possibility of significant differences in the study sample with regard to the last criterion). Four key business types will be part of the study: construction, manufacturing, services, and trade or retail. Enterprises that didn't come under the above categories will be marked as "unclassified"; this includes marketing or promotion, distribution, finance, and real estate.

Data collection will chiefly concentrate on constructing a databank of businesspersons from the African-American community residing in Cleveland and eastern suburbs. The study's target sample is 10 businesses owned and run by African-American businesswomen. At present, no clear list exists covering names, contact numbers and address of northeast Ohio's African-American businesswomen. Multiple sample selection approaches will be employed, of which one will be composing a listing of Black-owned enterprises, included in Cleveland's Black Pages, situated in Cleveland and eastern suburbs (Clemons and Mcbeth, 2009).

But owing to voluntary participation in the publication, it may not include all businesspersons. Compilation of another list -- businesspersons included in Cleveland City's and Ohio State Department's Certified Minority Business lists -- will cover companies wherein at least 51% of the firm is minority-owned. For this study each small business was located using both the City of Cleveland's Economic Development website Entrepreneur & Small Business Resources and Blackpages.com -- an Internet database repository of black-owned businesses with addresses and information nationwide.

The contact information for the small businesses was provided by the websites, which essentially served as a black-business Yellow Pages. The business owners were contacted and interviewed and the data recorded for analysis. Questions asked included whether or not the business had applied for and/or received a government contract through the city of Cleveland or any type of minority small-business owner type of grant.

Expected Results Study data is expected to indicate the link between minority set-aside initiative participation and whether significant, positive economic growth is enjoyed, irrespective of success measurement technique. Analysis The 10 female-owned small businesses identified in Cleveland included: 2 restaurants, 2 physician's health care offices, 2 construction firms, 2 law offices, 1 fashion design business, and 2 financial and business consulting firms.

One of the latter -- Bad Girl Ventures -- assists woman-owned start-up companies in tapping resources that can help facilitate successful launches and providing entrepreneurial educational skills to help the new female small-business owners meet objectives. Of the businesses contacted, the two construction firms had received direct incentives from the city's reserve for grants given to minority owned construction companies, allowing the business owners to reduce their required level of equity in their companies to only 10%.

One of the financial consulting firms had bid on an EMS billing contract offered by the Federal government but had not won. Another had bid on a banking and investment services contract. This bid was still open and no contract had yet been awarded. The fashion design business owner had bid on a contract to deliver police uniforms and since the bid date was still open, no contract had yet been awarded. This was not the company's first time bidding.

It had also placed bids on other clothing manufacturing contracts with the federal government but had not won. Each of the business owners who were aware of state and federal contracts complained of having to be "certified" in order to be eligible to bid on them -- a process that in the past had taken upwards of three months. That type of delay was difficult to justify especially for a small-business attempting to plan out its year.

In the words of one businesswoman "it doesn't help when you're waiting to hear back on whether or not you're even qualified to be a bidder -- you got a life meanwhile and you got customers you gotta be ready for now -- so it's kind of a lost cause in that respect." In the past year, however, the state of Ohio has worked to cut down times that it takes for minority-owned businesses to become eligible bidders, proudly asserting that the process can now be completed in under a month (Higgs, 2015).

Still, for minority-owned businesses and the African-American women who own them, it is understandable that there should be some lack of enthusiasm for going through the process again -- especially considering the limited amount of contracts designated to minority-owned businesses. Several businesses had not directly engaged in bidding for contracts but they were able to recount narratives about others who they knew who had participated in bidding processes and some that were awarded contracts.

Their overall perception of the set-aside policies was that it was good for minority-owned businesses -- but in terms of the success rate of minority-owned businesses obtaining federal contracts they were less enthused. Of the businesswomen owners interviewed, only 1 spoke of the process in positive terms. The others were either skeptical or unfamiliar with the set-aside policies. Of the small-business owners interviewed, only 10% of them offered a positive view of the set-aside program.

Higgs (2015) points out that since 2009 "minority participation in state business has generally been moving upward" but that in 2015 it finally reached its 15% goal. Essentially, 17.2% of state contracts "set-aside" for minority companies (Higgs, 2015). However, while this means that minority-owned businesses are being granted a share of the contracts for work, they are only included in a portion of those contracts. In short, as the interviews with the small-business owners in Cleveland suggests, the greater portion of contracts are not open to small-business owners: they are capped.

The legal and political broader policies impacting the set-aside initiative for African-American small businesswomen owners can be assessed by the figures associated with the employment of African-American females in the oil and gas industry -- which as Miller (2004) showed is a fundamentally white male industry.

The figures related to this industry are comparable to the figures related to Cleveland's African-American female small-business owners who were interviewed for this study and their assessment of the changes in their sectors regarding racial and gender equality: Fewer than 20,000 employees in the oil and gas industry are African-American women (Gillula, Fullenbaum, 2014, p. 20).

Moreover, the kind of change that is supposed to come with equality is not evident in this sector as the majority of women workers in the sector have "office and administrative" jobs rather than roles in "blue-collar" positions alongside men -- with the one exception being "the high share of women in semi-skilled and unskilled blue-collar occupations in the petrochemical segment" (Gillula, Fullenbaum, 2014, p. 21).

This however does not support the hypothesis that African-American women are able to maintain management positions or act as significant shareholders or stakeholders in industries otherwise dominated by white men. It remains a closed system and the set-aside programs by law are only there to do just that -- set aside a portion of the work for a specific minority group. A remnant or flavor of segregation thus permeates the atmosphere and gives the environment an aroma of being tainted by past prejudices.

From a rational point-of-view, the set-aside program works on one level and fails utterly on another. In the sense that minority-owned businesses are guaranteed a percentage of.