Racial Discrimination and Minority Business Enterprise: Evidence from the 1990 Census

01 January 2000
By Dr. Jon Wainwright

The self-employed represent an important and growing sector of the economy. However, in contrast to salary and wage workers, the issue of racial and ethnic discrimination against self-employed business owners has received little attention from economists. Those who have examined the issue discovered that most US minority groups are severely disadvantaged in the realm of business enterprise activity. In this book from Garland Publishing, NERA Vice President Dr. Jon Wainwright uses a very large sample of 1990 census microdata to document for the first time the large disparities in business formation and earnings facing minority businesses across a wide variety of geographic locations, industry divisions, and occupational groups. Moreover, the book demonstrates that these disparities tend to persist even when education, age, marital status, assets, industry, occupation, and other influential factors are held constant. The statistical findings are strongest for blacks, followed closely by Native Americans and Hispanics. Unexplained residuals consistent with discrimination are documented for Asians as well in many instances.

Dr. Wainwright's analysis suggests that among prime working age males, being an entrepreneur is a relatively more lucrative form of employment, on average, than working for a wage. Typically, however, non-Hispanic whites become entrepreneurs at much higher rates than minorities. Moreover, self-employed non-Hispanic whites receive much higher average earnings than their black, Hispanic, and Native American counterparts. Dr. Wainwright notes that in an attempt to respond to such inequalities, numerous federal agencies, state agencies, cities, counties, and special districts have adopted affirmative action policies designed to increase the participation of minority business enterprises in public contracting and procurement processes. However, a series of US Supreme Court decisions beginning in 1989 left the continued constitutionality of such affirmative action policies contingent upon documentation by individual public entities of the continued existence of racial and ethnic discrimination against the self-employed in their own jurisdictions. At the time these court decisions were handed down, this was something few jurisdictions were in a position to do.

This book was published as part of the Garland Studies in Entrepreneurship.