Reducing the Racial Wealth Gap with Minority Business Development
By Edie Stringfellow, Director of Diversity & Inclusion at MassBio
February is Black History Month in the U.S. and Canada. During this time of celebration, let’s look at how procurement processes can remove barriers to closing wealth gaps for black business owners and their communities. Supplier diversity may be an unfamiliar term, but it simply refers to proactive decisions by businesses and government agencies to contract with businesses owned by those from underserved groups. These dollars create economic ripples that promote business growth, job creation, and drive innovation.
Promoting an environment for diverse suppliers to connect with the life sciences community is important to MassBio and we are taking steps to accomplish this by fostering an inclusive vendor process internally and externally and by raising awareness of how supplier diversity fits into broader D&I initiatives.
To shed more light on the correlation between supplier diversity and closing the wealth gap in black communities, I spoke with Peter Hurst, President and CEO of the Greater New England Minority Supplier Development Council (GNEMSDC). Here is what Peter had to say.
A Racial Wealth Gap exists throughout New England, but in particular, in Massachusetts. Nationally, the median net worth (assets, less debt) in 2013 for a White family was 13 times greater than that of a Black family according to The Pew Research Center. The gap is even wider in Boston where the median net worth of a White family is $247,500, compared to $8 for an American born Black family, $12,000 for a Caribbean Black family, and $3,020 for a Puerto Rican family, according to a joint study by Pew and the Federal Reserve Bank of Boston. Wealth, or the lack thereof, affects where you live, the type of schools your children can attend, whether you can afford to buy a home and whether you have the resources to start and grow a business. A wealth gap based on race and ethnic background is the antithesis of the economic inclusion that will make our society and communities stronger and preserve our democracy.
Minority business development is an effective tool to reduce and reverse the negative impacts of this racial wealth gap. Minority business development makes all communities stronger and more vibrant. How? Minority businesses generate economic output in several ways: directly through the revenue generated by the sales of their goods and services; and indirectly through their purchases of goods and services from other businesses, including smaller minority-owned businesses. And, with their salaries, wages, and bonuses, the employees of minority businesses and their vendors spend money. Minority businesses also create and maintain jobs, especially in neighborhoods with higher degrees of unemployment and under-employment. As importantly, it is well documented that minority-owned businesses hire ethnic minorities. Directly and indirectly, minority businesses and their employees also generate incremental tax revenue at the federal, state, and local levels.
Independent data supports the existence of these contributions. The U.S. Commerce Department’s Minority Business Development Agency reported that in New England there are over 19,000 minority-owned businesses, generating over $18 billion in revenue and employing over 135,000 people. There are 250 minority-owned businesses already certified by the GNEMSDC, and this subset of the larger community of minority-owned businesses is focused on selling to large corporations.
Supporting minority businesses is not only about money. The owners of minority businesses help create and sustain a cadre of “Servant Leaders” in the communities in which they live and operate their businesses. For example, Robert Smith, who made a $40 million pledge to pay the student loan debt of the Morehouse College 2019 graduating class, runs a certified minority business enterprise. Throughout the country, but especially here in New England, the owners of minority businesses contribute their time, talent, and money to local organizations that serve our fellow citizens who need help, including our youth, the elderly, the homeless, and those suffering from addiction or mental illnesses.
Our leaders in the private and public sectors should focus on the underutilized potential of minority-owned businesses. The economic impact as measured by the contributions to our GDP, our wage base and our job base can and will be larger if there is a concentrated focus by the private and public sectors to do all of the following: 1) purchase more goods and services from minority-owned companies; 2) increase their access to debt and equity capital; and 3) provide intellectual capital in the form on “one on one” business consulting and training.
Growing and supporting minority-owned businesses is not just the “right thing to do”. It is the smart thing to do.
Peter F. Hurst, Jr. is the President and CEO of the Greater New England Minority Supplier Development Council, an organization focused on economic inclusion and minority business development. He also is Senior Advisor to a global private equity firm specialized in global infrastructure investments where he serves on the board of one of its portfolio companies. After careers as a practicing attorney and an investment banker, Peter started and ran two minority-owned businesses.