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For Release on DeliveryMonday, December 29, 1969 2 : 3 0 p.m. , E . S . T . THE ECONOMIC POTENTIAL OF BLACK CAPITALISM A Paper Presented By Andrew F. Brimmer Member Board o f Governors o f the F e d e r a l Reserve System and Henry S. T e r r e l l Economist D i v i s i o n of Research and S t a t i s t i c s F e d e r a l Reserve Board Before the 82nd Annual M e e t i n g o f the American Economic A s s o c i a t i o n New York H i l t o n H o t e l New Y o r k , New York December 29, 1969 THE ECONOMIC POTENTIAL OF BLACK CAPITALISM By Andrew F. Brimmer* and Henry S. T e r r e l l * * I. Introduction I n the r e c e n t p a s t i t has become f a s h i o n a b l e to s t r e s s a s t r a t e g y o f " b l a c k c a p i t a l i s m " as a means o f s t i m u l a t i n g economic development f o r Negroes. This r a t h e r unique s t r a t e g y has an i n t u i t i v e appeal to v a r y i n g shades o f p o l i t i c a l o p i n i o n . it To the b l a c k militant, i s a p p e a l i n g because i t promises community ownership o f p r o p e r t y and an end to " e x p l o i t a t i o n " by o u t s i d e merchants. A t the o t h e r the s t r a t e g y i s a p p e a l i n g to w h i t e c o n s e r v a t i v e s because i t extreme, stresses the v i r t u e s o f p r i v a t e e n t e r p r i s e c a p i t a l i s m as the p a t h to economic advancement i n s t e a d o f r e l i a n c e on p u b l i c e x p e n d i t u r e s , public welfare. especially Since t h i s s t r a t e g y has r e c e i v e d e x p l i c i t approval and encouragement i n the F e d e r a l government and has l e d t o the o f v a r i o u s governmental bodies-i^, i t merits a c r i t i c a l creation examination *Member, Board of Governors of the F e d e r a l Reserve System. **Economist, D i v i s i o n of Research and S t a t i s t i c s , F e d e r a l Reserve Board. We are g r a t e f u l to s e v e r a l persons f o r a s s i s t a n c e i n the p r e p a r a t i o n o f t h i s paper. We are p a r t i c u l a r l y i n d e b t e d to Mr. E r l i n g Thoresen o f the Board's s t a f f who d i d the computer programming anddesigned the format f o r the s p e c i a l t a b u l a t i o n s from the "Survey o f Economic O p p o r t u n i t y " conducted by the U . S . Government's O f f i c e of Economic O p p o r t u n i t y i n 1967. 1/ There are numerous o f f i c i a l bodies and programs, i n c l u d i n g the O f f i c e o f M i n o r i t y Business E n t e r p r i s e i n the U . S . Department o f Commerce (backed by a 63-man N a t i o n a l Advisory Committee), an I n t e r - a g e n c y Task Force on C a p i t a l Development f o r M i n o r i t y Businessmen, and P r o j e c t OWN i n the Small Business A d m i n i s t r a t i o n . for -2- o f the c o n t r i b u t i o n which i t might be expected to make t o m i n o r i t y economic development i n the U n i t e d S t a t e s . The s e l e c t i o n o f a s t r a t e g y c e n t e r i n g on b l a c k ownership of business e n t e r p r i s e s r a i s e s s e v e r a l fundamental economic questions which t h i s paper w i l l attempt t o answer: - What i s the n a t u r e of the economic environment i n which b l a c k businessmen operate? - What are the types of businesses t h a t are t o e v o l v e from t h i s environment? - What are the main economic f o r c e s a t work i n the n a t i o n a l economy t h a t are i n f l u e n c i n g the number and s c a l e o f o p e r a t i o n o f the types o f f i r m s i n which b l a c k businessmen are c o n c e n t r a t i n g ? likely Can black-owned businesses o f f e r reasonable employment o p p o r t u n i t i e s t o a s i z a b l e p r o p o r t i o n of the black population? I n terms o f i n d i v i d u a l o p p o r t u n i t i e s , which c a r e e r p a t h i s the more promising — a c a r e e r as a s e l f employed businessman or a c a r e e r as an employed manager or o f f i c i a l i n a l a r g e r c o r p o r a t i o n ? Expressed d i f f e r e n t l y , which economic choice i s s u p e r i o r — one i n v o l v i n g investment i n a business f i r m or one i n v o l v i n g investment i n human c a p i t a l ? Before i n v e s t i g a t i n g the e m p i r i c a l evidence on which an answer t o these questions must r e s t , i t i s i m p o r t a n t to d e f i n e " b l a c k capitalism" c a r e f u l l y , because the term has come t o mean d i f f e r e n t things t o d i f f e r e n t people. One r e c e n t study has d e f i n e d b l a c k c a p i t a l i s m as: "The s t r a t e g y which urges c r e a t i o n o f new jobs and p r o f i t centers inside ghetto areas. The program a l s o seeks t o t r a n s f e r the ownership o f g h e t t o business from w h i t e t o b l a c k c o n t r o l , a t the same time b u i l d i n g i n the ghetto new banks, insurance companies, p r o d u c t i o n , and s e r v i c e f a c i l i t i e s . 2 / Theodore L. Cross, Black C a p i t a l i s m : S t r a t e g y f o r Business i n the G h e t t o , New York, Atheneum, 1969, p. 211. -3- Still lf another study gave v i r t u a l l y the same definition: A more complete d e f i n i t i o n of b l a c k c a p i t a l i s m , t h e n , i s t h a t i t i s a p o l i c y f o r the promotion o f b l a c k o w n e r s h i p of business w i t h i n the urban g h e t t o . " 3 / I n d i v i d u a l s may take e x c e p t i o n to the p r e c i s e w o r d i n g these d e f i n i t i o n s , elements: of but we t h i n k most observers would agree on two key b l a c k business ownership and the l o c a t i o n of these businesses i n ghettoes. I n assessing the p o t e n t i a l of b l a c k c a p i t a l i s m , we accept these two b a s i c concepts o f black-owned businesses l o c a t e d p r i m a r i l y b l a c k ghettoes o f l a r g e m e t r o p o l i t a n in areas. The g e n e r a l r e s u l t s of our assessment can be summarized briefly: The low income, h i g h l e v e l s o f unemployment, r e l a t i v e l y l a r g e debts and r e l a t i v e l y small h o l d i n g s o f f i n a n c i a l assets of urban Negro f a m i l i e s c o n s t i t u t e a poor economic e n v i r o n ment f o r business i n v e s t m e n t . Moreover, economic advancement w i t h i n the Negro community may not improve p r o f i t prospects of Negro-owned businesses. I n s t e a d , i t may a c c e l e r a t e t h e c o m p e t i t i o n from n a t i o n a l f i r m s seeking t o s e r v e the expanding Negro m a r k e t . Negro businesses tend to be s m a l l - s c a l e operat i o n s , h e a v i l y concentrated i n the p r o v i s i o n of p e r s o n a l s e r v i c e s and neighborhood r e t a i l i n g , w i t h slender p r o f i t margins. W h i l e t h e i r small s i z e i s an o b s t a c l e to e f f i c i e n c y , economies of s c a l e do appear to p r e v a i l : i t is estimated that p r o f i t s i n c r e a s e roughly $ 1 0 . 0 0 per worker w i t h each i n c r e a s e o f $1,000 i n s a l e s . The attempt to expand s m a l l - s c a l e , Negro-owned businesses i s running a g a i n s t a strong n a t i o n a l trend. I n r e t a i l i n g ( i n which most Negro businessmen are engaged), the t r e n d i s toward l a r g e u n i t s i n which e f f i c i e n c y i s r i s i n g r a p i d l y . 3 / Bernard H. Booms and James E. Ward, J r . "The Cons of Black Capitalism." Business H o r i z o n s , Volume X I I , No. 5 , (October, 1969), p.9. -4- - Self-employment o f f e r s a poor economic f u t u r e f o r Negroes. The r e l a t i v e economic rewards from employment i n s a l a r i e d m a n a g e r i a l p o s i t i o n s or as craftsmen are roughly o n e - t h i r d to t w o - t h i r d s h i g h e r than the rewards o f self-employment i n the same occupations. I f b l a c k c a p i t a l i s m were even moderately s u c c e s s f u l over the next decade, i t would l e a d to the c r e a t i o n of between 550 thousand and 775 thousand j o b s . I f i t achieved even the most o p t i m i s t i c e x p e c t a t i o n s , the new jobs c r e a t e d would account f o r only s l i g h t l y more than h a l f o f the growth i n the Negro l a b o r force. So, i n 1980, b l a c k c a p i t a l i s t s would be able to employ no more than 12 per cent (and i n a c t u a l i t y probably a much s m a l l e r p r o p o r t i o n ) of the jobs Negroes would need. 1 - The Economic Environment of Black Businesses I n an e a r l i e r essay, the heavy dependence of Negro businesses on the p r o v i s i o n of p e r s o n a l s e r v i c e s i n a segregated market was i d e n t i f i e d as the c e n t r a l f u n c t i o n of Negro businessmen.it/ Before proceeding f u r t h e r w i t h t h i s assessment o f the prospects f o r b l a c k c a p i t a l i s m , we should pause b r i e f l y t o r e v i e w the consequences o f economic separatism which r e s u l t e d as an h i s t o r i c a l legacy of r a c i a l discrimination and s e g r e g a t i o n and the l a t e r consequences when some o f these b a r r i e r s were removed. In general, the e f f e c t s were s i m i l a r t o those produced i n i n t e r n a t i o n a l t r a d e when a h i g h t a r i f f w a l l i s e r e c t e d between two ountries: to t a r i f f separate markets p r e v a i l i n the two areas f o r items control. For the Negro community i n the U n i t e d S t a t e s , 4 / Andrew F. Brimmer, "The Negro i n the N a t i o n a l Economy," i n John P. D a v i s , E d . , The American Negro Reference Book, Englewood C l i f f s , P r e n t i c e - H a l l , 1966, Chapter 5 , pp. 251-336. subject the -5- g r e a t e s t b a r r i e r imposed by s e g r e g a t i o n was not i n the market f o r goods to which they g e n e r a l l y had r e l a t i v e l y open access - for personal services services) but i n the market (such as barber and beauty shops and f u n e r a l and i n p u b l i c accommodations Consequently, -- (such as h o t e l s and r e s t a u r a n t s ) . a p r o t e c t e d market evolved f o r the p r o v i s i o n of these s e r v i c e s w i t h i n the Negro community. Moreover, as one would e x p e c t , t h i s w a l l of p r o t e c t i o n provided i n c e n t i v e s f o r Negro p r o f e s s i o n a l s and e n t r e p r e n e u r s who began t o specialize in activities s e r v i c i n g the Negro community. were h i g h l y c o n c e n t r a t e d i n f i e l d s such as m e d i c i n e , gion - - Negro p r o f e s s i o n a l s e d u c a t i o n and r e l i - a l l h e d g e d - i n by s e g r e g a t i o n - - but a l l of which a l s o p r o v i d e d a protected market. I n occupations which were dependent upon u n p r o t e c t e d n a t i o n a l m a r k e t s , Negroes were c o n s p i c i o u s l y absent. For example, 1960 ( t h e l a t e s t year f o r which comprehensive Census d a t a are engineers, scientists, available) and t e c h n i c i a n s comprised only 3 . 8 per cent of Negroes c l a s s i f i e d as p r o f e s s i o n a l , technical, sponding f i g u r e f o r w h i t e s was 1 0 . 5 per c e n t . and m a n a g e r i a l ; the corre- fraction C l e a r l y Negro p r o f e s s i o n a l s were c o n c e n t r a t i n g on s e r v i c i n g the Negro community. I n business also Negroes were c o n c e n t r a t e d i n s e r v i n g the p r o t e c t e d Negro m a r k e t . the b e s t example. enterprises L i f e insurance p r o v i d e s Beginning i n the 1 8 8 0 f s , the major l i f e probably insurance companies e i t h e r stopped s e l l i n g p o l i c i e s t o Negroes or d i d so on the all The f r a c t i o n o f Negro p r o f e s s i o n a l s who were a r c h i t e c t s was l e s s than o n e - f i f t h the for whites. in -6- b a s i s o f d i f f e r e n t a c t u a r i a l t a b l e s which g r e a t l y i n c r e a s e d the cost o f p r o t e c t i o n t o Negroes. The r e s u l t was the c r e a t i o n o f an environment where Negro l i f e insurance companies were able t o grow and p r o s p e r . e n t e r p r i s e s t h a t sold to a more g e n e r a l p u b l i c , In such as hardware and department s t o r e s , Negroes have not made much headway. The r e c e n t progress toward d e s e g r e g a t i o n i n the U n i t e d S t a t e s (symbolized by the opening of p u b l i c accommodations) has eroded the p o s i t i o n o f many Negro businessmen who were dependent upon s e g r e g a t i o n to p r o t e c t t h e i r markets. For i n s t a n c e , i n many l a r g e c i t i e s (especially i n the East and M i d w e s t ) , most o f the h o t e l s and r e s t a u r a n t s which p r e v i o u s l y c a t e r e d t o Negroes have encountered hard t i m e s , and many have a c t u a l l y closed t h e i r doors. The legacy o f r a c i a l s e g r e g a t i o n i s o f c r i t i c a l importance because i t has shaped the economic environment i n which Negro businessmen a r e c u r r e n t l y o p e r a t i n g and — i n which they can be expected t o o p e r a t e i n t o the f o r e s e e a b l e f u t u r e . The g e n e r a l economic f a c t o r s d e t e r m i n i n g the l i m i t e d markets f a c i n g p o t e n t i a l b l a c k entrepreneurs r a t h e r w i d e l y known and bear only b r i e f mention.-5/ are I n 1967 the median f a m i l y income o f Negroes i n m e t r o p o l i t a n areas was o n l y 63 per cent of t h a t f o r w h i t e f a m i l i e s , and the unemployment r a t e i n c e n t r a l c i t i e s was 2 . 2 5/ For a more complete s t a t i s t i c a l i n f o r m a t i o n , see U . S . Department o f Commerce, Bureau o f the Census, Trends i n S o c i a l and Economic Conditions i n M e t r o p o l i t a n Areas, S e r i e s P - 2 3 , No. 27, February 7, 1969, U . S . Department o f Commerce, Bureau o f the Census, Recent Trends i n S o c i a l and Economic Conditions o f Negroes i n the U n i t e d S t a t e s , S e r i e s P - 2 3 , No. 26, J u l y , 1968, and U.S. Department o f Labor, Bureau o f Labor S t a t i s t i c s , Changes i n Urban America, BLS Report No. 353, A p r i l , 1969. -7- times g r e a t e r f o r Negroes than f o r w h i t e s . The unemployment d a t a p r o b a b l y u n d e r s t a t e the t r u e magnitude o f the l a b o r problem i n urban ghettoes due t o the underemployment of many urban Negroes^/ and the discouragement e f f e c t of the h i g h unemployment r a t e s on p o t e n t i a l Negro workers. The d a t a on income and employment h i g h l i g h t p a r t o f problem a r i s i n g from the l i m i t e d markets c o n f r o n t i n g b l a c k the entrepreneurs. Recent t a b u l a t i o n s from the Survey o f Economic O p p o r t u n i t y on the a s s e t and l i a b i l i t y p o s i t i o n o f Negro f a m i l i e s r e v e a l another dimension o f weakness o f the Negro m a r k e t . Survey d a t a on the asset and the liability p o s i t i o n o f households are s u b j e c t to c o n s i d e r a b l e e r r o r and must be interpreted with caution. The p r i n c i p a l source o f e r r o r i s t h a t assets are a p p r a i s e d by t h e i r owners and n o t e v a l u a t e d through a market trans- action, its and the owner o f an asset may have an i m p e r f e c t knowledge o f true value. Survey d a t a on assets a l s o s u f f e r t o some e x t e n t i n d e l i b e r a t e ommissions and d e l i b e r a t e from nonreporting. Given these c a u t i o n a r y comments, the d a t a i n Table 1 ( a t t a c h e d ) appear t o o f f e r c o n c l u s i v e evidence t h a t the n e t f i n a n c i a l p o s i t i o n o f Negro i s much worse than t h a t f o r w h i t e f a m i l i e s a t s i m i l a r l e v e l s o f families income. For example i n 1966, urban Negro households tended t o have o n l y o n e - h a l f to o n e - q u a r t e r the t o t a l asset accumulation of w h i t e f a m i l i e s . 6/ The Manpower Report o f the P r e s i d e n t issued A p r i l , 1968, r e p o r t e d a subemployment r a t e f o r nonwhites of 2 1 . 6 per cent compared t o a w h i t e r a t e of o n l y 7 . 6 per c e n t . On the -8- debt s i d e , Negro f a m i l i e s w i t h t o t a l incomes below $ 1 0 , 0 0 0 appear t o have o n l y s l i g h t l y l e s s i n t o t a l debt o b l i g a t i o n s than t h e i r counterparts, white and i n the h i g h e r income brackets Negro f a m i l i e s have roughly the same t o t a l amount of debt as w h i t e f a m i l i e s . Since Negro f a m i l i e s had v i r t u a l l y the same t o t a l amount of debt secured by c o n s i d e r a b l y less i n asset accumulation a t each l e v e l of income, their n e t f i n a n c i a l p o s i t i o n was s u b s t a n t i a l l y poorer than f o r w h i t e s . The d a t a i n Table 1 o f f e r conclusive evidence t h a t the income d i f f e r e n t i a l s t r a d i t i o n a l l y observed between w h i t e and Negro f a m i l i e s s e r i o u s l y unders t a t e the d i f f e r e n c e s i n economic w e l f a r e because they n e g l e c t poorer n e t asset p o s i t i o n of Negro f a m i l i e s . This poorer n e t the financial p o s i t i o n r e i n f o r c e s the income and employment d a t a i n suggesting urban ghettoes o f f e r poor p r o f i t p o s s i b i l i t i e s concentrated for that entrepreneurs there. The conclusion from t h i s s e c t i o n i s t h a t the low income, l e v e l s o f unemployment, and the poor n e t f i n a n c i a l p o s i t i o n of urban Negro f a m i l i e s c o n s t i t u t e a poor economic environment f o r business ment. high invest- A p a r a d o x i a l problem i s t h a t any economic advances by urban Negro f a m i l i e s may not n e c e s s a r i l y improve the p r o f i t prospects f o r Negro-owned businesses. W i t h i n c r e a s e d economic s t a t u s comes g r e a t e r m o b i l i t y and more d i v e r s e t a s t e s . As Negroes become more a f f l u e n t , they most likely w i l l p r e f e r to consume i n the more d i v e r s e n a t i o n a l economy. S t a t i s t i c a l evidence on the r e s i d e n t i a l choices of more a f f l u e n t Negro f a m i l i e s i n d i c a t e s t h a t t h i s p a t t e r n may i n f a c t be emerging. In -9- 1967, n o n c e n t r a l c i t y p o r t i o n s o f m e t r o p o l i t a n areas over one m i l l i o n contained 1 7 . 9 per cent of a l l Negro f a m i l i e s i n these a r e a s ; however;, these same sub-areas contained 2 3 . 0 per cent o f a l l Negro f a m i l y u n i t s w i t h incomes over $ 1 0 , 0 0 0 ; 2 5 . 7 per cent w i t h incomes o f $ 1 5 , 0 0 0 and 3 8 . 4 per cent of Negro f a m i l i e s w i t h incomes over $ 2 5 , 0 0 0 . end of the income d i s t r i b u t i o n spectrum, per cent o f a l l A t the o t h e r these areas c o n t a i n e d o n l y f a m i l y u n i t s w i t h income o f l e s s than $ 4 , 0 0 0 . In 12.4 these l a r g e m e t r o p o l i t a n a r e a s , the mean Negro f a m i l y income i n the n o n c e n t r a l p o r t i o n was $ 8 , 6 2 2 as a g a i n s t $ 6 , 7 5 0 i n the c e n t r a l c i t y , $ 1 , 8 7 2 or 2 7 . 7 per cent.. These d a t a must be i n t e r p r e t e d a gap of cautiously because of the small s i z e o f the Negro sample i n the h i g h e r income brackets; yet, they do appear to o f f e r some evidence suggesting g r e a t e r economic gains by Negro f a m i l i e s w i l l not n e c e s s a r i l y that benefit b l a c k e n t r e p r e n e u r s who serve m i n o r i t y gljettoes i n c e n t r a l c i t y districts. This same type of paradox faces b l a c k e n t r e p r e n e u r s i n search f o r q u a l i f i e d l a b o r . One of the s e r i o u s economic constraints on g h e t t o development i s the l a c k of human c a p i t a l among i t s residents. Businessmen have d i f f i c u l t y f i n d i n g employees w i t h h i g h l e v e l s e d u c a t i o n and o n - t h e - j o b work e x p e r i e n c e . their of The a c q u i s i t i o n of human c a p i t a l by g h e t t o r e s i d e n t s w i l l not n e c e s s a r i l y i n c r e a s e the supply of q u a l i f i e d l a b o r t o b l a c k businessmen because many of the q u a l i f i e d workers w i l l be a t t r a c t e d to the h i g h e r expected r e t u r n s and the j o b s e c u r i t y i n a f i r m o p e r a t i n g i n the n a t i o n a l economy. black greater -10- One f i n a l problem f a c i n g b l a c k e n t r e p r e n u e r s concentrated in urban ghettoes i s the impact o f f e d e r a l l y funded urban renewal programs on t h e i r v e r y e x i s t e n c e . One study has p o i n t e d o u t : "Since Negroes make up the l a r g e s t percentage of persons i n the low income l e v e l s , Negro-owned businesses i n Negro communities undergoing urban renewal g e n e r a l l y have h i g h l i q u i d a t i o n rates. "Z/ The same study c i t e s evidence from the Elmwood area o f D e t r o i t where 57 per cent o f Negro-owned businesses f a i l e d t o s u r v i v e urban renewal compared w i t h o n l y 35 per cent f o r w h i t e businesses. These f i n d i n g s underscore the paradox t h a t f e d e r a l urban renewal programs may i n be working a t cross purposes w i t h f e d e r a l programs t o f o s t e r capitalism. black I n e f f e c t , b l a c k c a p i t a l i s t s may s u f f e r not only from the economic advances o f Negroes but a l s o from f e d e r a l e f f o r t s to the p h y s i c a l c o n d i t i o n o f core III. fact Characteristics, ameliorate cities. Efficiency, and P r o f i t a b i l i t y of Black Businesses Having discussed the economic environment i n which b l a c k c a p i t a l i s t s have been o p e r a t i n g - - and are l i k e l y to operate - - it is i m p o r t a n t t o examine the c h a r a c t e r i s t i c s o f the businesses t h a t have evolved w i t h i n t h i s environment. Table 2 presents summary d a t a on the c a t e g o r i e s of Negro-owned businesses i n Washington, D. C . , l a r g e s t sample c u r r e n t l y a v a i l a b l e . i n 1967, These d a t a demonstrate q u i t e 7 / B r i a n Berry and o t h e r s , The Impact of Urban Renewal on Small Businesses. Chicago, U n i v e r s i t y of Chicago Center f o r Urban s t u d i e s , 1968, p. 116. the clearly -11- t h a t Negro businesses are h e a v i l y c o n c e n t r a t e d i n s e r v i c e s w i t h a secondary c o n c e n t r a t i o n i n r e t a i l t r a d e A n categories is p a r t i c u l a r l y revealing. e x a m i n a t i o n o f the sub- W i t h i n the main heading o f services, t h e r e i s a heavy c o n c e n t r a t i o n o f barber and beauty shops and d r y c l e a n i n g establishments. The r e t a i l s e c t o r i s comprised p r i m a r i l y o f w h i l e the category of f i n a n c e , insurance, and r e a l e s t a t e i s e x c l u s i v e l y u n i n c o r p o r a t e d r e a l e s t a t e agents. which emerges i s a mosaic of s m a l l , pattern segregation. l i t t l e has been known about the d e t a i l e d o f b l a c k businesses. almost s e r v i c e - o r i e n t e d businesses which owe t h e i r e x i s t e n c e t o a p r o t e c t i v e b a r r i e r o f To d a t e , The g e n e r a l foodstores, characteristics However, a s e v e n - c i t y survey o f 564 black-owned businesses conducted by the N a t i o n a l Business League (NBL)—/ i n e a r l y 1968 has helped t o f i l l t h i s d a t a gap. The NBL survey found roughly the same i n d u s t r y o r i e n t a t i o n as the Washington a r e a d i s p l a y e d . businesses surveyed, 102 ( 1 8 . 1 per c e n t ) were barber or beauty shops, 82 ( 1 4 . 5 per c e n t ) were grocery s t o r e s or supermarkets, were r e s t a u r a n t s , Of the 564 54 ( 9 . 6 per c e n t ) 38 ( 6 . 7 per c e n t ) were laundry or d r y c l e a n i n g establish- ments, and 40 ( 7 . 1 per c e n t ) were s e r v i c e s t a t i o n or auto r e p a i r The NBL survey was p a r t i c u l a r l y v a l u a b l e because i t places. gathered c o n s i d e r a b l e d a t a on the v a r i o u s c h a r a c t e r i s t i c s o f black-owned 8/ We have not overlooked the f a c t t h a t a s m a l l percentage of Negro businesses was also found i n c o n s t r u c t i o n , m a n u f a c t u r i n g , and t r a n s p o r t a t i o n . However, i n the n a t i o n a t l a r g e , these t y p i c a l l y have c o n s i s t e d m a i n l y o f s m a l l - s c a l e o p e r a t i o n s h e a v i l y dependent on the g h e t t o environment, and - - w i t h a few n o t a b l e e x c e p t i o n s - - have not competed i n the n a t i o n a l m a r k e t . 9 / P r o j e c t Outreach o f The N a t i o n a l Business League, Washington, D.C. June 24, 1969. The seven c i t i e s i n the NBL survey were A t l a n t a , C l e v e l a n d , Durham, N . C . , Jackson, M i s s i s s i p p i , Los Angeles, N o r f o l k , and Richmond. -12- businesses. A b r i e f p r o f i l e of the t y p i c a l b l a c k business d e p i c t s a v e r y small s c a l e of o p e r a t i o n . The businesses i n the NBL survey averaged only 2 . 2 f u l l time employees, 1 . 1 p a r t - t i m e had a mean gross income of o n l y $ 1 9 , 1 4 7 , $3,430.-12/ employees, and mean n e t p r o f i t of only I n a l a t e r s e c t i o n these f i g u r e s w i l l be compared t o averages f o r t h e n a t i o n a t l a r g e , but they show c l e a r l y t h a t the b l a c k f i r m s i n the survey are q u i t e small by any standards. The NBL d a t a also p e r m i t an elementary s t a t i s t i c a l o f the f a c t o r s a f f e c t i n g the p r o f i t a b i l i t y Ideally, analysis of Negro-owned b u s i n e s s e s . — ^ an economist would want to have i n f o r m a t i o n on the s i z e of c a p i t a l investment i n order t o c a l c u l a t e i n t e r n a l r a t e s o f Unfortunately, the return. the NBL survey d i d not g a t h e r d a t a on c a p i t a l investment, so the a n a l y s i s must be l i m i t e d to f a c t o r s a f f e c t i n g t o t a l n e t profits and p r o f i t s per employee. T o t a l n e t p r o f i t s depend on a v a r i e t y o f f a c t o r s , p a r t i c u l a r v a r i a b l e s were s e l e c t e d : (1) and four the s i z e o f the business as measured by the t o t a l number o f w o r k e r s , ! ^ (2) a measure of efficiency 10/ This compares w i t h an average p r o f i t f o r Negro businesses of $3,300 r e p o r t e d by Eugene P. F o l e y , former SBA A d m i n i s t r a t o r , to a Congressional Committee. See U.S. House of R e p r e s e n t a t i v e s , S e l e c t Committee on Small Business, Subcommittee No. 4 , on D i s t r i b u t i o n Problems A f f e c t i n g Small Business. H e a r i n g s , "Small Business Problems i n Urban Areas} 1 88th Congress, 2nd Session, 1964, p. 48. Two other important f a c t o r s which i n f l u e n c e the p r o f i t a b i l i t y of Negro-owned businesses are crime and insurance. See Crime Against Small Business, a Report of the Small Business A d m i n i s t r a t i o n t r a n s m i t t e d to the S e l e c t Committee on Small Business, U n i t e d S t a t e s Senate, 91st Congress, 1st Session, Document No. 9 1 - 1 4 , pp. 5 9 - 7 3 . 11/ L i n e a r l e a s t squares regressions were computed on 561 of the 564 respondents to the NBL survey. Three f i r m s had to be d e l e t e d due to obvious e r r o r s i n the d a t a cards. 12/ Since many f i r m s i n the NBL survey r e p o r t e d no employees, the t o t a l number o f workers was assumed to be the number of employees plus one. This a d d i t i o n a l worker was assumed t o r e p r e s e n t the owner o f the business. -13- which was assumed to be approximated by r e c e i p t s per w o r k e r , (3) the age o f the owner which was assumed to r e p r e s e n t e x p e r i e n c e , and ( 4 ) a dummy v a r i a b l e to account f o r membership i n a business organization. The s t a t i s t i c a l r e s u l t s a r e shown i n e q u a t i o n 1. (1) Total Profits = 0.088 X2 (6.00)** -894.81 (1.50) + + 14.17 X 3 (1.39) 347.58 Xx (7.15)** + + 1 , 7 4 9 . 2 1 X/ (3.23)** ( + s t a t i s t i c i n parentheses) —2 R » .18 F = 32.32 where: X^ = Number of workers = Receipts/worker X3 = Age o f owner X^ = Member o f Business O r g a n i z a t i o n The r e s u l t s of e q u a t i o n 1 appear to c o n f i r m the two hypotheses t o t a l p r o f i t s i n c r e a s e w i t h t o t a l s i z e and t h e measure of efficiency. The v a r i a b l e f o r experience had the expected s i g n but was not tically significant. Another that statis- i n t e r e s t i n g f i n d i n g was t h a t Negro f i r m s belonging to business o r g a n i z a t i o n s tended to have h i g h e r This f i n d i n g suggests t h a t these o r g a n i z a t i o n s , b e n e f i t to b l a c k entrepreneurs w i t h l i m i t e d profits. i n f a c t , may be of some experience. The r e s u l t s o f equation 1 were i n s t r u c t i v e i n s e t t i n g forth t h e f a c t o r s t h a t determined the t o t a l p r o f i t a b i l i t y o f black-owned ** * S i g n i f i c a n t a t 99 per cent l e v e l - - one t a i l e d S i g n i f i c a n t a t 90 per cent l e v e l - - one t a i l e d test. test. -14- businesses,but i t i s perhaps even more important t o test f o r economies o f s c a l e i n these businesses t o determine whether, i n f a c t , t h e r e i s any r e l a t i o n s h i p between s i z e and e f f i c i e n c y . Since t h e r e a r e no d i r e c t measures o f t h e t o t a l i n p u t s to these firms, i t hard to compare e f f i c i e n c y as s c a l e i n c r e a s e s . is Constrained by d a t a l i m i t a t i o n s , w e attempted to measure the e f f i c i e n c y o f these f i r m s by t h e p r o f i t s per w o r k e r . The main hypothesis i s t h a t p r o f i t s per worker w i l l i n c r e a s e w i t h the s i z e of the f i r m s . The s t a t i s t i c a l r e s u l t s are r e p o r t e d i n e q u a t i o n 2. (2) P r o f i t s per worker = + where: 18.91 X2 (4.78)** X^ = T o t a l + -151.32 (.67) 439.15 X3 (2.07)* + 0.00993 (4.94)** R = .09 F = 20.29 Receipts = Age o f Owner X3 = Membership i n Business Organization E q u a t i o n 2 sheds more l i g h t on the g e n e r a l f a c t o r t h e e f f i c i e n c y o f t h e f i r m s i n t h e NBL sample. appear t o p r e v a i l , since p r o f i t s each i n c r e a s e o f $ 1 , 0 0 0 i n s a l e s . affecting Economies o f s c a l e do i n c r e a s e roughly $ 1 0 . 0 0 per worker w i t h The v a r i a b l e f o r age o f the owner performed v e r y w e l l i n t h e p r o f i t per worker e q u a t i o n . This finding combined w i t h the l a c k o f a c l o s e r e l a t i o n s h i p i n e q u a t i o n 1 between t o t a l p r o f i t s and age o f owner when a v a r i a b l e f o r e f f i c i e n c y was i n c l u d e d suggests t h a t the e f f e c t s o f age on t o t a l p r o f i t a b i l i t y were p r o b a b l y picked up i n t h e e f f i c i e n c y term i n e q u a t i o n 1 . The v a r i a b l e -15- f o r membership i n a business o r g a n i z a t i o n performed q u i t e w e l l -- f u r t h e r c o n f i r m i n g the v a l u e o f these o r g a n i z a t i o n s as found i n e q u a t i o n 1. The main conclusions from t h i s s e c t i o n are t h a t Negro-owned businesses tend to be small i n terms o f s a l e s , employment, and p r o f i t s , and h e a v i l y c o n c e n t r a t e d i n personal s e r v i c e s and r e t a i l i n g . The s t a t i s t i c a l a n a l y s i s suggests t h a t the small s c a l e of many o f these f i r m s i s a hindrance t o e f f i c i e n c y since p r o f i t s per employee tend to r i s e r a t h e r c l o s e l y w i t h the l e v e l of o p e r a t i o n s as measured by t o t a l sales IV. receipts. The R e l a t i v e S i z e o f Black-Owned Business and Economic Trends A f f e c t i n g These Firms The l a s t s e c t i o n examined the c h a r a c t e r i s t i c s o f Negro-owned business. I n this section, these black-owned businesses are compared w i t h s i m i l a r , c a t e g o r i e s of white-owned f i r m s . Economic trends i n these areas are a l s o analyzed to determine whether the campaign to enhance the ownership of s m a l l - s c a l e e n t e r p r i s e s by Negroes i s i n conformance w i t h or running a g a i n s t - - -- trends i n the n a t i o n a l economy. T a b l e 3 compares the s i z e of Negro-owned businesses to the s i z e o f businesses i n the same c a t e g o r i e s as r e p o r t e d i n the 1963 Census of Business. Before a n a l y z i n g the d a t a i n Table 3 , two sources of upward b i a s f o r NBL survey d a t a must be noted. First, the NBL d a t a r e f e r 1968 as a base year w h i l e the Census d a t a were c o l l e c t e d i n 1963. w i l l be shown l a t e r , t h e r e has been a s t r o n g tendency f o r retail to As -16- busiriesses t o grow i n terms o f both s a l e s and employment. A second source o f upward b i a s f o r the NBL f i g u r e s concerns the q u e s t i o n asked about employment. The Census Bureau asked how many people were on the p a y r o l l a t a g i v e n moment i n t i m e , w h i l e the NBL asked f o r the number o f f u l l and p a r t - t i m e employees. i n the q u e s t i o n , it When p a r t - t i m e workers are i n c l u d e d seems reasonable f o r an e n t r e p r e n e u r to name a l a r g e r number than those who may be on h i s p a y r o l l a t any g i v e n moment in time. The d a t a on s i z e of f i r m d e f i n e d i n terms of employees or t o t a l r e c e i p t s show c l e a r l y t h a t Negro-owned businesses w i t h i n each c a t e g o r y tend t o be s m a l l e r . The discrepancy i s p a r t i c u l a r l y l a r g e in terms of s a l e s per e s t a b l i s h m e n t and widens i n both r e l a t i v e and absol u t e terms i n the c a t e g o r i e s where average s i z e was l a r g e s t . average Census f o o d s t o r e The ( t h e category w i t h the l a r g e s t r e c e i p t s ) was almost s i x and o n e - h a l f times as l a r g e as t h e average NBL f o o d s t o r e . I n b a r b e r and beauty shops, the category w i t h the s m a l l e s t receipts, average the average Census business had r e c e i p t s o f roughly one and o n e - h a l f times the average NBL businesses. The employment per e s t a b l i s h m e n t d a t a are not n e a r l y as c o n v i n c i n g i n terms of r e l a t i v e s i z e as the r e c e i p t s d a t a . Negro beauty and b a r b e r shops a c t u a l l y tended to have more employees on average than the t y p i c a l Census f i r m . I n large part, this reflects the b i a s e s mentioned e a r l i e r due to the d i f f e r e n t questions asked i n the NBL sample. The f a c t t h a t the s i z e d i f f e r e n t i a l s of establishments -17- are g r e a t e r when measured on a r e c e i p t s basis r a t h e r than on an employees b a s i s leads t o the r e s u l t t h a t r e c e i p t s per employee are from two and a h a l f t o f i v e times as g r e a t i n Census f i r m s as f o r those responding to the NBL survey. The g r e a t e s t r e l a t i v e and absolute d i f f e r e n c e r e c e i p t s per employee was found f o r f o o d s t o r e s , in the category w i t h the l a r g e s t absolute r e c e i p t s per employee. I n p a r t t h i s wide v a r i a n c e i n r e c e i p t s per employee i s caused by the biases which i n f l a t e the number of employees i n the NBL f i r m s . I n p a r t , however, i t must be a t t r i b u t e d to t h e r e l a t i v e l y lower o f the NBL f i r m s which operate on much s m a l l e r s c a l e s . efficiency The l a r g e r tend t o have a h i g h e r s a l e s per employee, suggesting a b e t t e r firms utiliza- t i o n of personnel. Given t h i s evidence r e l a t i n g to the g e n e r a l s i z e and c h a r a c t e r i s t i c s o f Negro-owned businesses, trends i n these a r e a s . it i s i n s t r u c t i v e to examine the growth Table 4 presents d a t a f o r the growth trends the r e t a i l s e c t o r where Negro businesses are h i g h l y c o n c e n t r a t e d . in One o f the most s t r i k i n g f e a t u r e s i s the absolute d e c l i n e i n the number of r e t a i l e s t a b l i s h m e n t s between 1948 and 1963. cent fewer r e t a i l e s t a b l i s h m e n t s than i n 1948. I n 1963 t h e r e were 3 . 5 per This t r e n d toward fewer r e t a i l establishments has not p e r s i s t e d evenly among f i r m s of a l l Between 1948 and 1963, t h e r e was a r a p i d i n c r e a s e i n the number o f f i r m s of the l a r g e s t s i z e as measured by the number of f i r m s w i t h over $ 1 , 0 0 0 , 0 0 0 . sizes. retail sales A t the o t h e r end of the spectrum, t h e r e has been a -18- p e r s i s t e n t d e c l i n e i n the a b s o l u t e number of s m a l l r e t a i l f i r m s . the 1948-63 p e r i o d , During the number of r e t a i l f i r m s w i t h r e c e i p t s under $ 2 0 , 0 0 0 d e c l i n e d by 162 thousand. The impact of the t r e n d t o l a r g e r r e t a i l u n i t s i s a l s o demons t r a t e d by the r i s e i n the p r o p o r t i o n of t o t a l r e c e i p t s r e c e i v e d by f i r m s w i t h s a l e s over $ 1 , 0 0 0 , 0 0 0 . For a l l r e t a i l f i r m s , t h i s f r a c t i o n roughly doubled i n the 1948-63 p e r i o d , and f o r foodstores the f r a c t i o n quadrupled. At t h e opposite extreme, the f r a c t i o n o f t o t a l practically receipts r e c e i v e d by f i r m s w i t h s a l e s of under $ 2 0 , 0 0 0 dropped from an i n s i g n i f i cant 3 . 8 per cent i n 1948 t o a microscopic 1 . 5 per cent i n 1963. These f i g u r e s suggest a c l e a r tendency f o r consumers t o spend a much l a r g e r f r a c t i o n of t h e i r d i s p o s a b l e income i n l a r g e r u n i t s t o r e s i n g e n e r a l , and i n p a r t i c u l a r a much l a r g e r f r a c t i o n of the t o t a l food budget being spent i n supermarkets r a t h e r than i n small grocery is stores. One f i n a l aspect of the growing tendency toward l a r g e r units i n r e t a i l i n g i s the i n c r e a s e i n the average number of employees per establishment. Between 1948 and 1963, the average number of employees per r e t a i l e s t a b l i s h m e n t i n c r e a s e d by about one-quarter. Having examined aggregate d a t a f o r r e t a i l i n g i n g e n e r a l , we can examine more c a r e f u l l y r e c e n t trends i n those s p e c i f i c i n which Negro businesses a r e c o n c e n t r a t e d . census d a t a f o r these f i v e c a t e g o r i e s . industries T a b l e 5 presents recent The p a t t e r n s observed f o r -19- r e t a i l i n g and s e r v i c e s i n g e n e r a l appear to apply t o these as w e l l : industries t h e r e was a d e c l i n e or slow r a t e of growth i n the a b s o l u t e number accompanied by a r i s e i n the r e c e i p t s and number of employees per establishment. The d e c l i n e i n the employees per establishment observed f o r l a u n d r i e s i s a c t u a l l y a m i s l e a d i n g s t a t i s t i c because i t does not account f o r the r a p i d r i s e i n s e l f - s e r v i c e few p e o p l e . If self-service l a u n d r i e s which employ v e r y l a u n d r i e s a r e n e t t e d o u t , the employment per e s t a b l i s h m e n t f i g u r e f o r 1963 r i s e s from 6 . 7 t o 9 . 2 . Unfortunately, t h i s breakdown i s not a v a i l a b l e f o r 1958 d a t a , but the adjustment for 1963 does suggest t h a t the observed t r e n d toward s m a l l e r l a u n d r i e s r e a l l y the impact of the r a p i d i n c r e a s e i n the number of is self-service laundries. On the basis of the a n a l y s i s i n t h i s s e c t i o n , we can conclude t h a t the s m a l l - s c a l e , l i m i t e d employment Negro-owned businesses a r e running counter t o strong trends i n the n a t i o n a l r e t a i l sector where the emphasis i s on l a r g e r u n i t s i n which r e c e i p t s per establishment r i s i n g more r a p i d l y than the number of employees per V. The S t r a t e g y of are establishment. Self-Employment The p r e v i o u s s e c t i o n s have analyzed b l a c k businesses i n the c o n t e x t of comparable businesses i n the g e n e r a l economy. This section w i l l consider the broader q u e s t i o n of the choice between s a l a r i e d and self-employment. T a b l e 6 presents d a t a from the Bureau of Labor Statistics -20- (BLS) showing growth trends i n the two h i g h e s t paying categories. occupational These two c a t e g o r i e s are i m p o r t a n t , because they c o n t a i n the b u l k of t h e s e l f - e m p l o y e d and a l l s e l f - e m p l o y e d i n the r e t a i l The h i g h e s t paying o c c u p a t i o n a l category i s t e c h n i c a l , and k i n d r e d w o r k e r s . trade. professional, I n the 1957-67 decade, employment in t h i s c a t e g o r y rose r a p i d l y , and both the a b s o l u t e number and r e l a t i v e p r o p o r t i o n of nonwhites a l s o rose s u b s t a n t i a l l y . The a b i l i t y of non- w h i t e s t o g a i n access t o the h i g h e s t paying and most r a p i d l y growing p r o f e s s i o n a l and t e c h n i c a l p o s i t i o n s i s an i m p o r t a n t step toward economic e q u a l i t y , and Negroes and o t h e r nonwhites have been encouraged t o a c q u i r e t e c h n i c a l e d u c a t i o n t o t a k e advantage of these expanding opportunities. The second h i g h e s t paying o c c u p a t i o n a l c l a s s i s managers, officials, and p r o p r i e t o r s . Employment i n t h i s category has not grown n e a r l y as r a p i d l y as i n the p r o f e s s i o n a l and t e c h n i c a l group, and the N e g r o ' s share has i n c r e a s e d by roughly a t h i r d i n the 1957-67 decade. The t r e n d s a f f e c t i n g t h i s second category become much c l e a r e r when the category i s subdivided i n t o s a l a r i e d and s e l f - e m p l o y e d , and the a r e f u r t h e r subdivided i n t o r e t a i l t r a d e and o t h e r s . workers i n t h i s c a t e g o r y , self-employed For salaried the growth t r e n d has roughly p a r a l l e l e d the t r e n d i n the p r o f e s s i o n a l category - - a r a p i d o v e r a l l r a t e of growth combined w i t h an e x t r a o r d i n a r i l y employment. and t h e i r r a p i d r a t e of growth of nonwhite Thus, t h e a b s o l u t e number of nonwhites t r i p l e d i n t e n y e a r s , r e l a t i v e share doubled. I n the p r o f e s s i o n a l and i n the salaried -21- m a n a g e r i a l o c c u p a t i o n a l c a t e g o r i e s , nonwhites as a f r a c t i o n o f the t o t a l i n c r e a s e d , because nonwhites were able t o g a i n access t o r a p i d l y growing p o s i t i o n s f a s t e r than the n a t i o n a l growth r a t e . I n the case of the s e l f - e m p l o y e d , emerges. an e n t i r e l y d i f f e r e n t picture Between 1957 and 1967, the number o f s e l f - e m p l o y e d i n the managers, o f f i c i a l s , and p r o p r i e t o r s c l a s s d e c l i n e d by 4 0 . 6 per I n the same p e r i o d , the share o f s e l f - e m p l o y e d who were nonwhite rose from 2 . 9 per cent t o 4 . 2 per c e n t . cent. actually I n the case then o f the self- employed, the i n c r e a s e i n the p r o p o r t i o n of nonwhites i s not due t o an ability to g a i n employment i n an expanding a r e a ; r a t h e r i t t o a r e l a t i v e sluggishness i n abandoning an a r e a which i s rapidly. declining This r e l a t i v e r e l u c t a n c e on the p a r t o f nonwhites t o l e a v e self-employment appears e v i d e n t i n the r e t a i l and o t h e r category. can be t r a c e d self-employed The d e c l i n e i n t h e a b s o l u t e number of s e l f - e m p l o y e d in r e t a i l t r a d e shown i n Table 6 coincides w i t h the trends t o fewer but l a r g e r r e t a i l establishments discussed i n S e c t i o n I V . The t r e n d toward the r a p i d d e c l i n e i n the number of self- employed managers has not been w i t h o u t economic j u s t i f i c a t i o n . Table 7 p r e s e n t s d a t a on the h i s t o r i c a l p a t t e r n o f earnings i n these two occupat i o n a l categories. I n the p r o f e s s i o n a l and t e c h n i c a l c a t e g o r y , median e a r n i n g s are much h i g h e r f o r the s e l f - e m p l o y e d than f o r the workers i n the same o c c u p a t i o n a l group. salaried The r a t e s o f growth i n earnings have been about e q u a l , so the r e l a t i v e gap has remained constant and the a b s o l u t e gap has widened. The s e l f - e m p l o y e d p r o f e s s i o n a l class is, -22- however, a very small c a t e g o r y c o n t a i n i n g professionals, roughly only o n e - n i n t h o f and i t s h i g h earnings and r a p i d earnings growth are in l a r g e p a r t accounted f o r by the r a p i d e a r n i n g s gains i n the medical profession. I n general, are physicians, lawyers, the b u l k of the s e l f - e m p l o y e d i n t h i s and accountants, category and the h i g h l e v e l of earnings r e p r e s e n t s a r e t u r n t o human c a p i t a l as d i s t i n c t from a r e t u r n on business investment. The f i g u r e s on earnings l e v e l s and earnings growth are c u l a r l y i n t e r e s t i n g f o r the subcategories i n the managers, and p r o p r i e t o r s c a t e g o r y . parti- officials, This category p r o b a b l y r e p r e s e n t s the funda- m e n t a l choices a v a i l a b l e t o someone w i t h l e s s than the human c a p i t a l become a p r o f e s s i o n a l or t e c h n i c a l w o r k e r . to He can e i t h e r become a s e l f - employed businessman or seek a s a l a r i e d p o s i t i o n as an o f f i c i a l manager w i t h an a l r e a d y e s t a b l i s h e d business. or The d a t a i n Table 7 show t h a t s a l a r i e d workers have h i g h e r median earnings than s e l f - e m p l o y e d individuals, and the r a t e o f growth o f s a l a r i e d earnings has been f a s t e r t h a n the r a t e o f growth o f earnings o f the s e l f - e m p l o y e d . c o r r a b o r a t e the f i n d i n g s i n T a b l e 6. These r e s u l t s The r e l a t i v e growth of the salaried segment w i t h i n the m a n a g e r i a l c l a s s i s c l e a r l y a l o g i c a l economic response t o the h i g h e r and more r a p i d l y growing earnings i n s a l a r i e d vis-a-vis self-employment. 1 3 / I n 1967 o n l y 626 thousand heads o f f a m i l i e s were s e l f employed p r o f e s s i o n a l s r e p r e s e n t i n g 1 1 . 1 per cent of a l l f a m i l y u n i t s headed by a p r o f e s s i o n a l and 1 . 3 per cent o f a l l f a m i l y units. -23- Economists expect a t w o f o l d r e l a t i o n s h i p between earnings differentials and o c c u p a t i o n a l s h i f t s . An earnings d i f f e r e n t i a l is expected to induce an occupation s h i f t to h i g h e r paying p o s i t i o n s , and the o c c u p a t i o n a l s h i f t i s supposed t o narrow the d i f f e r e n t i a l s by expanding the r e l a t i v e supply i n the o r i g i n a l l y h i g h e r paying occupation. I n the case of the components o f managers, o f f i c i a l s , and p r o p r i e - tors^ the r a p i d o c c u p a t i o n a l s h i f t has not reduced the earnings differential. I n 1958 the median earnings o f a s a l a r i e d worker i n t h i s category were $ 1 , 4 1 6 - - or 2 7 . 5 per cent h i g h e r than f o r a s e l f - e m p l o y e d individual. By 1968 t h i s gap had widened to $ 3 , 2 5 2 - - or 4 3 . 9 per c e n t . Table 7 p o i n t s up the economic r a t i o n a l e f o r the v e r y d e c l i n e i n the number o f s e l f - e m p l o y e d i n the r e t a i l t r a d e . rapid This o c c u p a t i o n a l choice i s by f a r the lowest paying w i t h i n the m a n a g e r i a l category, and i t s median earnings d e c l i n e d c o n t i n u o u s l y r e l a t i v e s a l a r i e d managers. to I n 1958 a s e l f - e m p l o y e d male i n r e t a i l t r a d e had median earnings equal t o 6 9 . 8 per cent of the earnings o f a s a l a r i e d manager; i n 1963 the r a t i o had d e c l i n e d to 6 5 . 1 per c e n t , and by 1968 had d e c l i n e d f u r t h e r t o 6 3 . 8 per c e n t . On the b a s i s of t h i s it historical evidence, self-employment i n r e t a i l t r a d e i s not a promising choice f o r a future career. The f a i l u r e of the r a p i d s h i f t from s e l f to s a l a r i e d employ- ment w i t h i n the m a n a g e r i a l class to reduce the earnings gap between these two types of c a r e e r s has serious i m p l i c a t i o n s f o r f u t u r e employment trends. The continued l a r g e r e l a t i v e economic r e t u r n s to s a l a r i e d as -24- a g a i n s t self-employment suggest s t r o n g l y t h a t the f u t u r e w i l l a further witness r a p i d exodus from s e l f t o s a l a r i e d employment. The d a t a on the r e l a t i v e e a r n i n g s changes i n Table 7 were suggestive, but tabulations from t h e 1967 Survey o f Economic O p p o r t u n i t y p r o v i d e a much more complete p i c t u r e o f the earnings and income opportun i t i e s a v a i l a b l e t o w h i t e s and Negroes. Negro heads o f f a m i l i e s , t o t a l i n Table 7. For earnings of the same p a t t e r n emerges as from the n a t i o n a l A g a i n , one can observe much h i g h e r expected earnings f o r self-employed professionals human c a p i t a l ) (See Table 8 . ) ( i n large part r e f l e c t i n g returns and much lower expected earnings f o r s e l f - e m p l o y e d f o r s a l a r i e d managers. to than Not s u r p r i s i n g l y the same r e s u l t s c a r r y over to t o t a l f a m i l y income — suggesting c l e a r l y t h a t the s e l e c t i o n o f self- employment by the head o f the f a m i l y w i l l r e s u l t n o t o n l y i n lower e a r n ings t o h i m s e l f b u t also t o a s u b s t a n t i a l l y lower t o t a l f a m i l y income s i n c e e a r n i n g s o f the head c o n s t i t u t e the major p r o p o r t i o n o f family income • The d a t a i n T a b l e 8 are p a r t i c u l a r l y i m p o r t a n t because they a l l o w a comparison o f the expected r e t u r n s f o r Negroes as s e l f - e m p l o y e d managers versus employment as c r a f t s m e n . are r a t h e r s t r i k i n g . The r e s u l t s o f t h i s comparison I n 1966, mean e a r n i n g s of s e l f - e m p l o y e d Negro managers were o n l y 6 6 . 4 per cent as h i g h as those o f c r a f t s m e n . the o p p o s i t e p a t t e r n p r e v a i l e d f o r w h i t e s - - Exactly among whom expected e a r n - ings o f s e l f - e m p l o y e d managers were 2 5 . 2 per cent h i g h e r than f o r c r a f t s men. T a b l e 9 shows t h a t w h i l e t h e r e l a t i v e earnings o f a Negro c r a f t s m a n -25- were 7 2 . 1 per cent of h i s w h i t e c o u n t e r p a r t , those o f a self-employed manager were o n l y 3 8 . 3 per cent as high The wide discrepancy between w h i t e s and Negroes i n the relative earnings from self-employment as a manager or a craftsman i s explained by the f a c t t h a t s e l f - e m p l o y e d Negro businessmen are h e a v i l y concentrated i n the poorer g h e t t o economy, w h i l e a Negro craftsman operates f o r most p a r t i n the n a t i o n a l economy. Business A d m i n i s t r a t i o n , i t the I n a study prepared f o r the Small was found t h a t Negroes owned o n l y 2 . 7 per cent o f a l l businesses i n the survey, but t h a t they owned 1 8 . 3 per cent of a l l businesses l o c a t e d i n ghettoes and only 0 . 7 per cent of businesses l o c a t e d i n the suburbs. Stated s l i g h t l y d i f f e r e n t l y , 3 3 . 3 per cent of all businesses owned by Negroes were l o c a t e d i n the g h e t t o w h i l e only 3 . 2 per cent of the businesses owned by w h i t e s were i n the g h e t t o . i l / Clearly the low income s t a t u s of the s e l f - e m p l o y e d Negro manager i s i n l a r g e p a r t due to h i s c o n c e n t r a t i o n i n the poor economic environment o f the ghetto. The case of the Negro craftsman i s completely d i f f e r e n t . the g h e t t o economy has l i t t l e e f f e c t i v e demand f o r h i s s k i l l s , Since he i s employed p r i m a r i l y i n the n a t i o n a l economy, and h i s job r i g h t s are o f t e n 14/ A l b e r t R e i s s , J r . M i n o r i t y E n t r e p r e n e u r s h i p , unpublished Report submitted to O f f i c e of P l a n n i n g , Research and A n a l y s i s o f the Small Business A d m i n i s t r a t i o n , June 30, 1969, p. 9. 15/ T a b u l a t i o n s from the Survey of Economic O p p o r t u n i t y c o n f i r m R e i s s 1 f i n d i n g s i n a s l i g h t l y d i f f e r e n t manner. In c e n t r a l c i t i e s of SMSA's over 2 5 0 , 0 0 0 , 6 4 . 6 per cent o f s e l f employed Negro managers l i v e d i n census d e f i n e d p o v e r t y areas w h i l e only 1 3 . 1 per cent o f s e l f - e m p l o y e d w h i t e s l i v e d i n these areas. -26- p r o t e c t e d by strong unions. The problem f a c i n g the Negro craftsman i s n o t r e l a t i v e wages, since unions tend to i n s i s t upon equal wages f o r all members, but r a t h e r being a b l e to o b t a i n f u l l f l e d g e d membership i n the c r a f t unions w i t h t h e i r a p p r e n t i c e s h i p requirements and s e n i o r i t y pre- ferences. The d i s p a r i t y i n the r e l a t i v e rewards t o Negro craftsmen compared to s e l f - e m p l o y e d Negro managers i s i m p o r t a n t because i t points out one of the economic problems a s s o c i a t e d w i t h m a i n t a i n i n g a s e l f c o n t a i n e d g h e t t o economy. It i s a x i o m a t i c i n economics t h a t the r e a l wages of l a b o r i n c r e a s e d i r e c t l y w i t h the amount o f complementary capital. By b e i n g employed i n the n a t i o n a l economy, the Negro craftman i s working w i t h r o u g h l y the same amount o f c a p i t a l as h i s w h i t e c o u n t e r p a r t . The s e l f - e m p l o y e d Negro manager, however, by b e i n g l i m i t e d m a i n l y t o the s m a l l amount o f complementary c a p i t a l a v a i l a b l e from the low l e v e l of g h e t t o s a v i n g s , w i l l have a s u b s t a n t i a l l y lower expected income. The g e n e r a l c o n c l u s i o n from t h i s s e c t i o n i s t h a t i n the m a n a g e r i a l occupations - - as d i s t i n c t o f f e r s a poor economic f u t u r e f o r Negroes. self-employment from the p r o f e s s i o n a l area -- The r e l a t i v e economic rewards t o Negroes o f employment i n s a l a r i e d m a n a g e r i a l p o s i t i o n s or as craftsmen o f f e r much h i g h e r economic rewards - - p r i m a r i l y because they p e r m i t Negro employee t o work w i t h a r e l a t i v e l y l a r g e amount of capital rather the complementary than c o n f i n i n g h i m s e l f to the c a p i t a l s h o r t ghetto. -27- VI. The Employment P o t e n t i a l of Black C a p i t a l i s m At t h i s p o i n t , we should pause to ask how much d i f f e r e n c e i t might make to Negroes g e n e r a l l y i f the campaign f o r b l a c k were to achieve even a moderate l e v e l of success. t h i s c o n t e x t i s obviously d i f f i c u l t . capitalism D e f i n i n g success One c r i t e r i o n in (and a measure emphasized by some of the most vigorous advocates of b l a c k c a p i t a l i s m ) might be the e q u a l i z a t i o n of the Negro's share of ownership and c o n t r o l of e n t e r p r i s e s i n a l l i n d u s t r i e s across the board. I n our judgment, such a standard of success i s c l e a r l y too harsh and u n l i k e l y t o be attained. Instead, it seems reasonable to use more h o s p i t a b l e tests r e l a t i n g to the e q u a l i z a t i o n of the Negro share of ownership and c o n t r o l , by the year 1980, i n those f i e l d s where they are a l r e a d y concentrating. U t i l i z i n g t h i s c r i t e r i o n , we can make a rough e s t i m a t e o f the employment p o t e n t i a l f o r Negroes of a reasonable degree of success achieved by b l a c k c a p i t a l i s m . I n making t h i s e s t i m a t e , the f i r s t step was to t a k e the t o t a l number of businesses i n the U n i t e d S t a t e s economy i n those areas i n which Negroes are c o n c e n t r a t i n g and e s t i m a t e number of e n t e r p r i s e s which Negroes would c o n t r o l i f they owned the same share of each type o f businesses as t h e i r share i n the t o t a l ( 1 1 per c e n t ) . the population The second step was to e s t i m a t e the t o t a l number o f jobs made a v a i l a b l e by these f i r m s using d a t a on the average number o f jobs per e s t a b l i s h m e n t . The c a l c u l a t i o n s were performed under the alternative assumptions t h a t these f i r m s would employ a t the same r a t e s found i n -28- (1) the N a t i o n a l Business League sample d e s c r i b e d above or (2) r e p o r t e d by a l l the r a t e s f i r m s i n the o v e r a l l Census d a t a . The r e s u l t s of the c a l c u l a t i o n s performed under the two n a t i v e assumptions are presented i n Table 10. alter- The t o t a l number of jobs c r e a t e d i n the p r i n c i p a l l i n e s of Negro business a c t i v i t y ranged roughly between 320 thousand and 450 thousand. I t was noted e a r l i e r t h a t these l e a d i n g f i e l d s c o n t a i n almost t h r e e - f i f t h s o f a l l Negro businesses. Assuming t h a t the employment prospects of the r e s t of the Negro businesses were the same as i n the c a t e g o r i e s i d e n t i f i e d - expanded p r o p o r t i o n a t e l y - - and assuming t h a t they the r e s u l t i n g expansion would l e a d to the c r e a t i o n o f between 550 thousand and 775 thousand new j o b opportunities, depending upon the assumptions r e g a r d i n g the NBL-sample or Census Bureau employment rates. To measure the impact o f t h i s h y p o t h e t i c a l job c r e a t i o n through the expansion of black-owned businesses, these f i g u r e s must be compared to the t o t a l Negro l a b o r f o r c e expected i n 1980 of roughly 11,205 w o r k e r s T h e thousand c r e a t i o n o f between 550 thousand and 775 thousand job o p p o r t u n i t i e s means t h a t these black-owned businesses would o f f e r employ- ment to between 4 . 9 per cent and 6 . 9 per cent of the t o t a l Negro l a b o r force. Stated d i f f e r e n t l y , between 9 3 . 1 per cent and 9 5 . 1 per cent of Negro workers would s t i l l r e q u i r e jobs i n firms owned and c o n t r o l l e d by persons o t h e r than Negroes i n 1980. 16/ The number o f Negroes expected i n the l a b o r f o r c e i n 1980 were o b t a i n e d from U . S . Department o f Labor, Bureau of Labor S t a t i s t i c s , S p e c i a l Labor Force Report No. 73, Labor Force P r o j e c t i o n b^ C o l o r , 1 9 7 0 - 8 0 , September, 1966. The BLS e s t i m a t e s f o r nonwhites were reduced by 8 . 7 per cent to account f o r those nonwhites who are not Negroes. -29- A second and even more r a d i c a l assumption r e g a r d i n g the success of b l a c k c a p i t a l i s m would be to assume t h a t by 1980 Negro businessmen would c o n t r o l 11 per cent of a l l r e t a i l and s e r v i c e establish- ments and t h a t these establishements would o f f e r the same job p o t e n t i a l as c u r r e n t r e t a i l and s e r v i c e o p e r a t i o n s . Table 11 shews t h a t under these assumptions by 1980 black-owned f i r m s would o f f e r employment t o only 1,284 thousand w o r k e r s , or t o 1 1 . 4 per cent of a l l Negroes i n the labor Having made some r e p r e s e n t a t i v e c a l c u l a t i o n s on the employment prospects of b l a c k c a p i t a l i s m by the year 1980, i t is instructive to put these f i g u r e s i n p e r s p e c t i v e by comparing them t o the growth of the Negro l a b o r f o r c e over the n e x t decade. Our best e s t i m a t e s taken from BLS d a t a are t h a t the Negro labor f o r c e w i l l expand from 8 , 8 7 9 thousand i n 1970 to roughly 11,205 thousand by the end of the decade, i m p l y i n g a growth of 2,326 thousand. Our most r a d i c a l assumption f o r the success of b l a c k c a p i t a l i s m was an employment e f f e c t of thousand i n t h i s same p e r i o d , 1,284.0 suggesting t h a t a t best firms owned by Negroes could employ only s l i g h t l y b e t t e r than h a l f Negro workers d u r i n g the decade of the 1 9 7 0 f s . the increment Thus, i n 1980 b l a c k c a p i t a l i s t s would be able to o f f e r employment to only a small o f the Negro work f o r c e , in fraction and the absolute number of Negro workers rely- i n g on employment i n f i r m s owned by persons o t h e r than Negroes would undoubtedly i n c r e a s e i n the next decade. I n making the above c a l c u l a t i o n s r e g a r d i n g the employment p o t e n t i a l of b l a c k c a p i t a l i s m , we o m i t t e d c o n s i d e r a t i o n of employment force. -30- i n Negro-owned f i r m s i n t r a n s p o r t a t i o n , m a n u f a c t u r i n g , and c o n s t r u c t i o n . T h i s omission was not a c c i d e n t a l ; r a t h e r i t r e s u l t e d from the b a s i c f a c t t h a t t h e r e are few Negro-owned f i r m s competing i n these types o f businesses. facturing) Since f i r m s i n these c a t e g o r i e s (and e s p e c i a l l y i n manu- r e l y on i m p o r t a n t economies of s c a l e , it is highly unlikely t h a t a l i m i t e d l o c a l i z e d g h e t t o economy could e f f e c t i v e l y support them. I n the case o f c o n s t r u c t i o n , it should a l s o be noted t h a t the b u l k o f the i n c r e a s e i n the supply o f g h e t t o b u i l d i n g s a r i s e s p r i m a r i l y from the conversion of e x i s t i n g s t r u c t u r e s and to a much l e s s e r e x t e n t from the c r e a t i o n of new s t r u c t u r e s . Thus, the o u t l o o k f o r c o n s t r u c t i o n companies c o n f i n e d to g h e t t o o p e r a t i o n s i s not v e r y promising. For these reasons, we have c o n f i n e d our e s t i m a t e s of t h e employment p o t e n t i a l of b l a c k c a p i t a l i s m to the f i e l d s i n which Negro businessmen seem most likely t o expand. VII. Concluding Observations The g e n e r a l c o n c l u s i o n from t h i s a n a l y s i s i s t h a t the of black capitalism, as we have d e f i n e d i t , o f f e r s a very strategy limited p o t e n t i a l f o r economic advancement f o r the m a j o r i t y of the Negro population. The g h e t t o economy as we understand i t provide p r o f i t a b l e opportunities today does not appear f o r l a r g e s c a l e business to investment, and any economic advances made by r e s i d e n t s of t h i s m a r g i n a l sector of the economy i n a l l prospects. l i k e l i h o o d w i l l not m a t e r i a l l y a l t e r T h i s s i t u a t i o n i s i n l a r g e p a r t due to a tendency f o r Negroes t o shop i n the more d i v e r s e n a t i o n a l economy. the investment affluent -31- The s t r a t e g y of b l a c k c a p i t a l i s m f a i l s , more fundamental reason: it however, i s founded on the premise of for an even self-employment. Our r e s e a r c h has i n d i c a t e d c l e a r l y t h a t self-employment i s a r a t h e r r a p i d l y d e c l i n i n g f a c t o r i n our modern economy because the rewards to employment i n s a l a r i e d p o s i t i o n s are s u b s t a n t i a l l y g r e a t e r . Self- employment may be the p a t h to a f f l u e n c e f o r the f o r t u n a t e few who are v e r y s u c c e s s f u l , but f o r the g r e a t m a j o r i t y o f the Negro p o p u l a t i o n it o f f e r s a low and r a t h e r r i s k y expected p a y o f f . At t h i s j u n c t u r e , we would l i k e to p o i n t out t h a t our disenchantment w i t h the s t r a t e g y of b l a c k economic development through b l a c k i s not based simply on i t s l i m i t e d economic p o t e n t i a l . captitalism "Je a r « a l s o concerned t h a t r e l i a n c e on such a s t r a t e g y may s u b s t i t u t e f o r e f f o r t s in v i t a l areas which a r e of the utmost importance t o the Negro p o p u l a t i o n . In the long r u n , the p u r s u i t of b l a c k c a p i t a l i s m may r e t a r d the Negro's economic advancement by d i s c o u r a g i n g many from the f u l l participation i n the n a t i o n a l economy w i t h i t s much broader range of challenges and opportunities. A s t r a t e g y of b l a c k c a p i t a l i s m may also prove d e l e t e r i o u s to the Negro community because, i n the words of two o b s e r v e r s , ,f the programs would place those l e a s t capable of accepting r i s k i n the of a c c e p t i n g l a r g e r i s k s . "JLZ/ position New g h e t t o e n t e r p r i s e s would c e r t a i n l y be more prone to f a i l u r e than a l r e a d y e s t a b l i s h e d f i r m s , and t h e i r f a i l u r e s would l e a v e a l a s t i n g burden on the i n d i v i d u a l s s t a r t i n g these f i r m s and on 17/ Booms and Ward, op. c i t . , p. 25 -32- those employees who had been induced to work i n such e n t e r p r i s e s r a t h e r than i n businesses not dependent on the g h e t t o economy. The s o l u t i o n of the economic problems o f Negroes and 18/ o t h e r disadvantaged groups i n a complex and d i f f i c u l t must be made on a v a r i e t y of f r o n t s , of black Efforts and the choice among the mix o f programs must be made q u i t e c a r e f u l l y . of f a c i l i t a t i n g taskr— 7 I t was w i t h the express purpose t h i s choice t h a t we have analyzed the economic potential capitalism. 18/ For an e x c e l l e n t d i s c u s s i o n o f these problems and a l t e r n a t i v e s o l u t i o n s see L e s t e r C. Thurow, P o v e r t y and D i s c r i m i n a t i o n , Washington, D . C . , The Brookings I n s t i t u t i o n , 1969. For a s p e c i f i c t r e a t m e n t of the q u e s t i o n o f b r i n g i n g business t o g h e t t o e s see Sar A. L e v i t a n and Robert T a g g a r t , I I I , "Developing Business and Entrepreneurs i n the G h e t t o s , " Background Paper Prepared f o r The Community S e l f - D e t e r m i n a t i o n S t e e r i n g Committee, Washington, D . C . , A p r i l 17, 1969. Table 1 T o t a l A s s e t s , T o t a l Debts and Net W o r t h Mean Amounts ( i n d o l l a r s ) f o r A l l F a m i l i e s by S i z e o f Income, Race and U r b a n - R u r a l P l a c e o f Residence 1966 S i z e of Income T o t a l Assets White Negro T o t a l Debts White Negro Net Woi: t h White Negro Urban 0-2,499 2,500-4,999 5,000-7,499 7,500-9,999 10,000-14,999 15,000-19,999 2 0 , 0 0 0 & over Total 10,356 14,507 16,861 21,233 31,523 53,219 119,838 25,403 2 ,4 4 9 3,318 6,921 8,977 15,421 31,102 47,884 6,070 1,028 1,949 4,305 6,665 8,884 12,519 25,386 6,125 693 1,497 3,285 3,942 7,534 11,797 26,052 2,663 9,328 12,558 12,556 14,568 22,639 40,700 94,452 19,278 1,756 1,821 3,636 5,035 7,887 19,305 21,832 3,407 Rural 0-2,499 2,500-4,999 5,000-7,499 7,500-9,999 10,000-14,999 15,000-19,999 2 0 , 0 0 0 & over Total 14,577 18,706 20,786 28,625 36,321 84,584 180,147 25,598 3,005 3,673 8,429 21,213 19,730 20,510 1/ 4,639 1,813 2,833 4,554 7,250 7,513 11,808 24,525 4,724 466 1,294 3,595 5,629 3,724 1,830 1/ 1,277 12,764 15,873 16,232 21,375 28,808 72,776 155,622 20,874 2,539 2,379 4,834 15,584 16,006 18,680 1/ 3,362 Urban & R u r a l 0 - 2 , 4 9 9 2,500-4,999 5,000-7,499 7,500-9,999 10,000-14,999 15,000-19,999 2 0 , 0 0 0 & over Total 11,668 15,657 17,707 22,541 32,167 56,272 124,877 25,444 2,600 3,380 7,090 9,480 15,562 30,468 47,884 5,825 1,271 2,191 4,357 6,761 8,700 12,451 25,315 5,832 632 1,461 3,321 4,009 7,409 11,201 26,052 2,427 10,397 13,466 13,350 15,780 23,467 43,821 99,562 19,612 1,968 1,919 3,769 5,471 8,153 19,267 21,832 3,398 1/ No cases r e p o r t e d . S o u r c e : T a b u l a t e d f r o m t h e Survey o f Economic O p p o r t u n i t y . Table 2 D i s t r i b u t i o n of Negro Owned and Operated Business i n Washington, D. C . , 1967 Type of Business Services Barber shops, beauty salons, or beauty schools D r y c l e a n i n g establishments Retail Carryout shops, d e l i c a t e s s e n s , grocery s t o r e s , or r e s t a u r a n t s Contract C o n s t r u c t i o n Transportation Finance, Insurance Real e s t a t e Manufacturing Newspaper p u b l i s h e r s , p r i n t e r s , signshops Wholesale Total Source: Number Per Cent 1,249 60.5 555 146 473 26.9 7.1 22.9 240 119 82 84 73 35 11.6 5.8 4.0 4.1 3.5 1.7 28 20 1.4 1.0 2,062 100.0 A D i r e c t o r y of Negro-Owned and Operated Businesses i n Washington, D. C . , compiled by Small Business Guidance and Development C e n t e r , Howard U n i v e r s i t y , 1967, Table 3 Selected C h a r a c t e r i s t i c s Number Type of of Business Firms: of Employees Es t a b l i s h m e n t s Bus i n e s s NBL Negro-Owned v s . A l l per Receipts Establishments Census Census Census Survey 75,052 4.8 6.7 $14,655 $50,607 $3,053 $ 7,553 102 257,236 2.5 1.1 6,678 9,817 2,671 8,925 Stations 40 211,473 2.3 2.5 18,065 84,360 7,854 33,744 Foodstores 82 319,433 3.1 4.0 28,258 178,997 9,115 44,749 Eating 67 223,876 1.8 6.7 7,346 62,054 4,081 9,262 564 2,769,604 3.3 4.2 19,147 102,538 5,802 24,405 Barber Shops Gasoline All Service Places Services Retail NOTE: and Trade For purposes Census data. category Source: Survey NBL 38 and NBL per Employee Census Beauty Survey Receipts per Establishments Survey Laundr i e s NBL Firms of of comparability The NBL category the of NBL categories grocery stores had to and supermarkets be adjusted is slightly compared to to match the the Census foodstores. P r o j e c t O u t r e a c h o f The N a t i o n a l B u s i n e s s League, U . S . Department o f Commerce, Bureau o f t h e Census, 1963 Census o f B u s i n e s s , Volume 1 , R e t a i l Trade-Summary S t a t i s t i c s , and Volume 7 , S e l e c t e d S e r v i c e A r e a S t a t i s t i c s , W a s h i n g t o n , D. C . , 1966. Data f o r Negro-owned f i r m s a r e f r o m NBL Survey and r e f e r t o 1968. Table 4 Growth Trends i n R e t a i l T r a d e , (Numbers i n thousands) 1948 Number o f R e t a i l Establishments 1954 1948-1963 1958 1963 P e r c e n t a g e Change 1948-1963 1,769.5 1,721.7 1,788.3 1,707.9 Number w i t h Receipts over $ 1 , 0 0 0 , 0 0 0 10.4 19.0 25.2 36.1 Number w i t h R e c e i p t s under $ 2 0 , 0 0 0 515.4 467.5 464.5 353.0 - 31.5 P r o p o r t i o n of T o t a l R e c e i p t s Received by Firms w i t h Receipts over $ 1 , 0 0 0 , 0 0 0 (all retail) 19.8 26.0 29.4 36.5 + 84.3 P r o p o r t i o n o f T o t a l Foodstore R e c e i p t s Received by Firms over $ 1 , 0 0 0 , 0 0 0 12.0 27.0 38.6 46.4 +286.7 3.9 4.1 4.4 4.9 Employment per Establishment (all retail) Source: - 3.5 +247.1 + 25.6 U . S . Department of Commerce, Bureau of the Census, 1963 Census of B u s i n e s s , Volume R e t a i l T r a d e , Summary S t a t i s t i c s . 1, Table 5 Recent Growth Trends i n Areas of Negro Business Type of Business Number o f Establishments (thousands) Percentage Change 19 63 1958 Laundries 67.9 79.1 +16.49 Beauty and Barber Shops 215.4 257.2 +19.41 8,884 Gasoline S t a t i o n s 206.8 211.5 + 2.27 68,834 Foodstores 356.8 319.4 -10.48 E a t i n g Places 229.8 223.9 - 1,794-7 1,707.9 - 979.2 1,061.7 + 8.2 A l l R e t a i l Trade All Services Source: Concentration Receipts per Establishment Percentage Change 1958 1963 Employees per Establishment Percentage Change 19 58 19 63 + 4.13 8.2 6.7 -18.3 9,817 +10.50 1.0 1. 1 +10.0 84,360 +22.56 2.3 2.5 + 8.7 137,948 178,997 +29.76 3.4 4.0 +17.4 2.57 4 4 , 1 6 5 662,054 +40.50 5.7 6.7 +17.5 4.84 117,057 142,690 +21.90 4.4 4.5 +11.4 +12.4 9.2 11. 5 +12.5 $48,600 $50,607 33,995 41,995 U.S. Department of Commerce, Bureau o f t h e Census, 1963 Census o f Business, Volume 1, R e t a i l T r a d e , Summary S t a t i s t i c s . Table 6 Trends i n Self-Employment (Thousands) Percentage Growth 1957 / O c c u p a t i o n a l Category \ f Professional, Technical, and Kindred Managers, O f f i c i a l s and Proprietors Salaried Self-Employed Self-Employed R e t a i l Trade Self-Employed Excluding R e t a i l Trade T o t a l Employment source: 1962 1967 1957 -67 Nonwhite Nonwhite Nonwhite as as as T o t a l Nonwhite Per Cent T o t a l Nonwhite Per Cent T o t a l Nonwhite Per Cent T o t a l Nonwhite of T o t a l of T o t a l of T o t a l 6,476 246 3.8 8,040 373 4.6 9,879 592 6.0 52.5 140.7 6,705 3,045 3,660 140 35 105 2.1 1.1 2.9 7,408 4,053 3,356 188 77 111 2.5 1.9 3.3 7,495 5,284 2,211 209 115 94 2.8 2.2 4.2 11.8 73.5 -40.6 49.3 228.6 -10.4 1,835 61 3.3 1,583 49 3.7 1,074 51 4.7 -41.5 -16.4 1,825 44 2.4 1,773 52 2.9 1,137 43 3.8 -37.7 - 6 5 , 1 0 0 6,647 10.4 i57,846 7 , 0 0 4 10.5 74,372 8 , 0 1 1 10.8 11.4 U . S . Department of Labor, Bureau of Labor S t a t i s t i c s , "The Negro Job S i t u a t i o n : Has i t Improved? 11 , Labor Force Report No. 102, January, 1969, 0.2 20.5 Special Table 7 MEDIAN EARNINGS OF MALE, FULL TIME WORKERS, 14 YEARS AND OVER, (Amount i n d o l l a r s ) O c c u p a t i o n a l Category o f e s s i o n a l , T e c h n i c a l , and Kindred Self-Employed M e d i c a l and h e a l t h Other Salaried Engineers, t e c h n i c a l M e d i c a l and h e a l t h T e a c h e r s , elem. & s e c . Other 1958 1963 1968 6,730 7,987 10,542 11,231 11,783 12,678 10,932 17,358 , 25,000±-' 14,903- 7,825 9,512 10,243 12,359!/ 17,195" 8,779 , 9,784- 6,154 8,151 - - A b s o l u t e changes 1958-63 1963-68 1958-68 1958-1968 P e r c e n t a g e change 1958-68 1958-63 1963-68 1,257 2,555 3,812 +18.7 +32.0 +56.6 552 5,575 12,322 3,971 6,127 + 4.9 +47 . 3 +97.2 +36.3 +54.6 2,418 2,847 3,729 4,208 +20.1 +16.7 +30.9 +29.9 +57 . 2 +51.6 1,299 1,402 1,829 2,307 3,128 3,709 +23.0 +23.1 +26.3 +30.9 +55.4 +61.1 - - — 1,311 1,361 - - - - — - - 5,651 6,075 6,950 7,477 5,909 7,339 9,794 1,430 2,455 3,885 +24.2 +33.5 +65.7 Self-Employed I n R e t a i l Trade Other-Self-Employed 5,145 4,527 5,772 5,782 5,280 6,368 7,409 6,801 8,250 637 753 596 1,627 1,521 1,882 2,264 2,274 2,478 +12.4 +16.6 +10.3 +28.1 +28.8 +29.6 +44.0 +50.2 +42.9 Salaried 6,561 8,115 10,661 1,554 2,546 4,100 +23.7 +31.4 +62.5 Managers, o f f i c i a l s , and P r o p r i e t o r s Memorandum: +28.2 1,092 +22.3 1,684 2,776 T o t a l w i t h Earnings 4,888 5,980 7,664 SOURCE: Unpublished T a b u l a t i o n s p r o v i d e d by the U . S . Department of Commerce, Bureau o f t h e Census, 1/ P h y s i c i a n s and surgeons only. 2/ I n c l u d e s m e d i c a l and h e a l t h workers shown s e p a r a t e l y i n p r e v i o u s y e a r s . +56.8 Table 8 Mean Income and Earnings by Occupation and Race of Head of F a m i l y , Urban F a m i l i e s , 1966 (Amount i n d o l l a r s ) Race and Occupational Category White Professional, Technical, and Kindred Managers, O f f i c i a l s , Proprietors Craftsmen Total Negro Professional, Technical, and Kindred Managers, O f f i c i a l s , Proprietors Craftsmen Total, A l l Families Source: T o t a l Family Income A l l Units Self-Employed T o t a l Earnings A l l U n i t s Self-Employed All Earnings o f Head U n i t s Self-Employed 11,750 18,787 10,880 16,641 9,607 15,600 12,248 9,091 8,250 11,283 7,587 11,655 11,403 8,663 7,212 10,277 6,762 10,363 9,995 7,035 5,855 8,807 5,260 8,965 9,393 15,725 9,035 14,750 6,846 11,144 6,779 6,913 4,996 5,328 4,228 5,418 6,213 6,634 4,374 4,647 3,871 4,814 4,696 5,075 3,164 3,374 2,866 3,428 Tabulated from The 1967 Survey of Economic O p p o r t u n i t y . Table 9 Negro Income and Earning as Percentage of W h i t e , by Occupation, Urban F a m i l i e s , 1966 Occupational Category T o t a l Family Income SelfA l l U n i t s Employed T o t a l Earnings SelfA l l U n i t s Employed Earnings of Head SelfA l l U n i t s Employed Professional, Technical, and Kindred 79.9 83.7 83.0 88.6 71.3 71.4 Managers, O f f i c i a l s , and P r o p r i e t o r s 55.3 47.2 54.5 45.3 46.9 38.3 Craftsmen 76.0 55.7 76.6 57.2 72.1 54.5 Total, A l l Families 60.6 46.5 60.6 46.5 54.0 38.3 Source: Tabulated from 1967 Survey of Economic O p p o r t u n i t y . Table 10 Employment P o t e n t i a l of B l a c k C a p i t a l i s m i n 1980: Assuming P r o p o r t i o n a t e Share of Businesses i n Area of Present C o n c e n t r a t i o n (Thousands) Type of Business T o t a l Number o f Establishments Negro Share of Establishments P o t e n t i a l Jobs Overall Rates NBL Rates 79.1 8.7 41.8 58.3 Beauty and Barber Shops 257.2 28.2 70.5 31.0 Gasoline S e r v i c e Station 211.5 23.2 53.4 58.0 Foodstores 319.4 35.1 108.8 140.4 E a t i n g Places 223.9 24.6 44.3 164.8 1,091.1 119.8 318.8 452.5 - - 550.0 775.0 Laundries Total, 5 Categories Total, A l l Categories T a b l e 11 Employment P o t e n t i a l o f B l a c k C a p i t a l i s m i n 1980: Assuming P r o p o r t i o n a t e Share o f B u s i n e s s e s i n A l l S e r v i c e s and R e t a i l Trade (Thousands) Retail Service Total Number of Establishments i n 1963 1,707.9 1,061.7 2,769.6 Employees 8,410.2 3,261.5 11,671.7 4.9 3.1 4.2 187.9 117.2 305.1 920.7 363.3 1,284.0 Employees/Per Establishment Negro Share of Establishments T o t a l Negro Job P o t e n t i a l (117,)
@FedFRASER