Economic Mobility of Black and Hispanic Families
Small Businesses create 1.5 million jobs every year, and COVID-19 is having a negative impact on many of them. Under COVID-19, 35 percent of Small Business (SB) had closed doors, affecting many families.
For Black and Brown entrepreneurs, the prospects are even more negative as 41% of Black-owned SB are closing doors in the same period.
In the U.S. we create over 600,000 new Small Businesses every year. While Black people represent 13% of the U.S. population and Hispanics represent 18%, only 10% of newly created businesses are opened by Hispanics and 7% by Black entrepreneurs.
Why do we have a gap of more than 80,000 new businesses, every year, that should be created by Black and Hispanic people in the U.S.?
When we combine the SB closure rate with the weekly unemployment claims of over one million new individuals unemployed, we see a disproportionate amount of Black, Hispanic, and Low-Income families affected. This is driven not only by COVID-19 but also by the rapidly increasing skills-gap in our most vulnerable populations as many jobs are replaced by automation to some degree.
Whether it is becoming a solo participant in the digital economy, a single person LLC or a small store owner, the benefits of increasing entrepreneurship are exponential. If kids in vulnerable areas see a Black, a Hispanic, a fearless Female entrepreneur, then they will see hope and a role model to pursue.
There are many important but uncoordinated efforts to address this problem.
The landscape of professional development is fragmented and inefficient in their reach to the target audience of Black and Hispanic communities.
The existing financial literacy tools, lending institutions, and resources to help entrepreneurs, are not tailored to the needs and realities of Black or Hispanic individuals.
The discovery of the resources and tools listed in #1 and #2 on this list, is done mainly through search engines that are not optimized for trustworthy content and rather for advertising money, resulting in lack of optimal, and in many cases, misleading results (such as multi marketing schemes to get out of poverty, or fake diplomas)
Access to data to inform better policymaking and social justice is mainly done through traditional search engines that lack a domain-specific knowledge graph to present relevant and trusted results.
A related social challenge, also documented in X4impact is the Negative Effects Of Investing Apps For Vulnerable Populations. It affects a disproportionate amount of Black and Hispanic individuals that lack financial literacy, resulting in devastating economic effects.
How can we train the displaced workforce at a faster pace to mitigate accelerated poverty due to unemployment and sub employment among Black and Hispanic communities in the US?
Over 80 million workers or roughly 60% of all the jobs in the US are hourly jobs and a significant percentage of these jobs (source to get exact data) are disappearing due to COVID-19 and automation. Over 12 million of these hourly workers are Black and 17 million are Hispanic, representing, together, over 35% of the total labor.
The U.S. government has tried for years to address the skills-gap challenge. In 2009, nine agencies spent $18 billion on 47 public programs to elevate low-skill workers’ skills and quality of life (up from $5 billion and three programs since 2003). Studies show that these employment and training programs spread funding over too many issues and failed to eradicate any of them. Even in times of high unemployment, these programs saw sub-10 percent participation rates.
How can we encourage and facilitate Entrepreneurship among Black and Brown communities? Given the economic forecast post-COVID-19 and the evolution towards a “gig economy”, Entrepreneurship, in addition to addressing the skills-gap, is another key way to provide people with economic opportunities.
Small Businesses create 1.5 million jobs every year, and COVID-19 is having a negative impact on many of them. Under COVID-19, 35% of Small Businesses (SB) have closed doors. For Black and Brown entrepreneurs, the prospects are even grimmer, as 41% of Black-owned small businesses are closing doors in the same period.
In the U.S. we open over 600,000 new SB every year. While Black people represent 13 percent of the U.S. population and Hispanic people represent 18 percent, only 10 percent of newly created businesses are opened by Hispanic entrepreneurs and 7 percent by Black entrepreneurs.
When we combine the SB closure rate with the weekly unemployment claims of over one million new unemployed individuals, we see a disproportionate amount of Black, Hispanic, and Low-Income families affected. This is driven not only by COVID-19 but also by the rapidly increasing skills-gap in our most vulnerable populations as many jobs are replaced by automation to some degree.
Research conducted by Robert W. Fairlie and published by the National Bureau of Economic Research (see citations) on the economic impact of COVID-19 further highlights the disparities:
The number of active business owners in the United States plummeted by 3.3 million or 22 percent over the crucial two-month window from February to April 2020. The drop in business owners was the largest on record, and losses were felt across nearly all industries and even for incorporated businesses.
African-American businesses were hit especially hard experiencing a 41 percent drop.
Hispanic business owners fell by 32 percent, and
Asian business owners dropped by 26 percent.
Simulations indicate that industry compositions partly placed these groups at a higher risk of losses.
Immigrant business owners experienced substantial losses of 36%.
Female-owned businesses were also disproportionately hit by 25 percent.
These findings of early-stage losses to small businesses have important policy implications and may portend longer-term ramifications for job losses and economic inequality.
These are two interesting data points from a working paper: Race and Economic Opportunity in the United States: An Intergenerational Perspective
Black Americans and American Indians have much lower rates of upward mobility and higher rates of downward mobility than whites, leading to persistent disparities across generations.
The Black-white gap persists even among boys who grow up in the same neighborhood. Controlling for parental income, Black boys have lower incomes in adulthood than white boys in 99% of Census tracts. The few areas with small Black-white gaps tend to be low-poverty neighborhoods with low levels of racial bias among white people and high rates of father presence among Black people. Black males who move to such neighborhoods earlier in childhood have significantly better outcomes. However, fewer than 5% of Black children grow up in such areas. Our findings suggest that reducing the Black-white income gap will require efforts whose impacts cross neighborhood and class lines and increase upward mobility specifically for Black men.
Increased the Number of new SB created by Black and Hispanic individuals and take it to parity with the number of SB created by non-minority groups, based on their percentage of the population. 13% of new SB opened by Black entrepreneurs and 18% new SB opened by Hispanic entrepreneurs.
Decrease unemployment or sub employment in Black and Hispanic groups in the U.S.
In addition to that we must:
Tackle ignorance and racism head-on through the courts and in the schools.
We must tackle poverty with thoughtfulness.
We must fix our healthcare system, and ensure that we address the alarming health disparities between the African American Community and White America.
We must also invest in our nation's inner cities and restore abandoned communities as places of hope and opportunity.
The end beneficiaries are Black and Hispanic people in the U.S. But the effects are potentially impacting local Small Businesses in vulnerable communities, Minority Focused NPOs, Economic Mobility related programs, and related organizations.
Center for Workforce Inclusion and CWI Labs
Capitol Hill Partners with longstanding relationships of trust with key federal policymakers into the project.
Private Foundations with a focus on Economic Mobility and Social Justice
Federal Government Programs focused on economic development
Local Government in the selected pilot cities: Tulsa, Baltimore, Seattle
Local grassroots organizations that support Black and Hispanics in the selected pilot cities
Giving Tech Labs
Other Technology Partners
There are many foundations, universities, and government organizations in the US providing funding for research and activities related to the Economic Mobility of Black Families and other underrepresented minorities. for example Pew Research Trust.
CWI Labs and Giving Tech Labs are funding the research phase related to applied Artificial Intelligence to understand root causes and friction points to inform better policymaking. That technology is a fundamental building block to implement some of the ideas described in this document
We are seeking funding for the implementation of the ideas described in this document.
CWI Labs and Giving Tech Labs are are currently raising $3M in catalytic grants, government grants, corporate social responsibility funds or impact investing funds to create the phase I of this online platform, the Domain Specific Knowledge Graph and AI algorithms and pilot the technology and the program in OK, MD and WA (see details in IDEAS section below)
CWI Labs in partnership with Giving Tech Labs combine expertise on the subject with expertise in A.I. and cloud computing. We are raising funds to create an AI-based online platform to help remove the friction points that Black, Hispanic, and Low-Income families face in their pursuit of happiness and economic independence. Our initial focus is entrepreneurship or better employment as part of the digital and/or gig economy. We are calling it PROJECT91K.
There are concrete steps we propose:
Enable better policymaking, general awareness, and collaboration in areas related to workforce development, inclusion, equity, and the enablement of minority entrepreneurship.
Address skill-gap and get a better job, become a freelancer in the digital economy, or pursue entrepreneurship as a solo-freelancer or Small Business owner.
Influence change in lending practices and fomenting Financial Literacy. On the topic of Financial Literacy, there are complementary ideas listed on this challenge: Negative Effects Of Investing Apps For Vulnerable Populations.
Educate and inspire our vulnerable communities.
Address the systemic and root causes behind unemployment, sub-employment, and lack of opportunity
Whether it is becoming a solo participant in the digital economy, a single person LLC or a small store owner, the benefits of increasing entrepreneurship are exponential. If kids in vulnerable areas see a Black, a Hispanic, and fearless Female entrepreneur, they will see hope and a role model to pursue.
The Tech4PI Solution:
AI-Powered Domain-Specific Knowledge Graph to inform Policy Making and Social Justice: Enable better policymaking, general awareness, and collaboration in areas related to workforce development, inclusion and equity, and the enablement of minority entrepreneurship.
Sector Aggregator and Safe place to search for quality content: Serve as the aggregator of relevant tools and trusted content appropriate for Black, Hispanic, and low-income individuals to:
address their skill-gap and get a better job or become a freelancer in the digital economy.
pursue entrepreneurship as a solo-freelancer or an SB owner.
An example of a safe search engine powered by a domain-specific knowledge graph is the RESOURCES tab of X4i.org and the details, including a published research paper, are documented in x4i.org/our-data
The core idea described in this concept note has many potential sustainability sources:
Sponsorships from Consumer Brands that serve Black and Hispanic Communities. There are tangible benefits delivered to these communities as we provide access to tools that help them address their skill gaps, find jobs, find non-predatory lenders, etc. Consumer brands would gain positive brand awareness and new customers by promoting these services
Recruiting Fees from hiring organizations. On average, the total cost of hiring hourly workers in the US is around $3,000 per hire (see data sources section on this concept note). This is driven by the high advertising fees paid by employers to job boards such as Indeed, JobRapido, Monster, or ZipRecruiter. If we become a trusted source of good quality workers that addressed their skill gap, we can claim a share of the multibillion-dollar job advertising business in the US
Key Goal: enable 91,000 new Black and Hispanic families in the U.S. to achieve financial independence through entrepreneurship or by addressing their skills-gap that results in unemployment or sub employment.
Secondary Metrics: Unique Visitors, Active Users, Online Training Completion Rate, Job Application Trends, Growth in number of resources available (training, jobs, non predatory credit outlets, access to credit in the same terms as non minority populations
We will focus on three selected communities: We have chosen the following three cities to test the tools, prove the model and define the repeatable playbook to take this nationwide:
Tulsa OK, because of its 19th century ascendance as a Black-led center of business and entrepreneurship and its destruction nearly 100 years ago by white mobs that ushered in an unremitting legacy of Black poverty and exclusion.
Baltimore MD, because of chronic poverty among Black residents fueled by racism, but also because of promising pilot programs that are successfully promoting Black entrepreneurship.
Seattle WA, for the capital and technological resources it can bring to reducing minority unemployment and as a hub of the Black Lives Matter movement
Additionally there are several solutions featured on X4Impact that are working to eliminate economic disparities, improve inclusion in workplaces and more:
RiseKit’s software connects entry-to mid-level job candidates to jobs, training programs, and supportive services to rise above all the barriers to employment while providing analytics for employers, nonprofits, and grant makers. We believe all Americans should have access to a career path.
Opportunity at Work helps employers look beyond degrees and hire for skills instead. Millions of Americans are locked out of better jobs simply because they lack a four-year degree. Yet these workers have skills that companies desperately need – skills they developed through military service, in training programs, at community colleges, on the job, or through other alternatives to college.
Mission Asset Fund's vision is to create a fair financial marketplace for hardworking people. Because when one person is invisible, stuck or strapped, it hurts an entire family. And when one family suffers, the whole community suffers. That’s why we work to make Lending Circles and other loan products available nationwide. Our work is built on hidden strengths: of people, of nonprofits, of communities.
fINEQUITY is an early-stage organization working to create a free financial inclusion tool for incarcerated people. Our mission is to create pathways to economic security for New Yorkers impacted by long-term incarceration
Economic Mobility of Black and White Families - JULIA B. ISAACS, The Brookings Institution
US Bureau of Labor and Statistics, Characteristics of Minimum Wage Workers.
Labor Substitution and the Digital Revolution, a Ticking Time Bomb - Luis Salazar - 2016
CEA report finds most government training programs fall short - AEI Jun 2019.
Raj Chetty & Nathaniel Hendren & Maggie R Jones & Sonya R Porter, 2020. 'Race and Economic Opportunity in the United States: an Intergenerational Perspective*,' The Quarterly Journal of Economics, vol 135(2), pages 711-783.
National Bureau of Economic Research - Robert W. Fairlie - The Impact of COVID-19 on Small Business Owners - June 2020
Total Cost of Replacing an Hourly Employee - Qlicket analysis from GlassDoor, Center For America Progress, Institute dor Research on Labor and Employment.