Minority-Owned Businesses in Philadelphia and the Need for More Data
BIPOC-Owned Businesses in Philadelphia
Lack of available data about BIPOC-owned businesses in Philadelphia is impeding our understanding of current trends and our ability to identify opportunities for investment and growth. Without detailed and timely data representing the state of BIPOC-owned businesses, the city’s civic and business communities will continue to struggle in identifying and enacting strategies, policies, or programs that can better support the diverse business ecosystem. Especially in the wake of business closures that occurred because of the COVID-19 pandemic, a more up-to-date view of the diverse business landscape would allow policymakers to better identify the facilitators and barriers to equitable business development and intervene when and where support is needed.
The most recently available data on BIPOC-owned businesses in Philadelphia, sourced from the U.S. Census Bureau’s Annual Business Survey (ABS), has several limitations. Available for reference years 2017-2021, the survey provides estimates only at the metropolitan-level. Also, its exclusive coverage of employer-firms leaves out any diverse businesses without paid employees (e.g., sole proprietorships or early-stage start-ups).
In this analysis, we include estimates for the four racial or ethnic groups with the largest local representation as employers: non-Hispanic white, Black, Hispanic/Latino, and Asian. ABS estimates are not consistently available for American Indian and Pacific Islander populations.
What You Need to Know:
Racial and Ethnic Representation in Employer Firm Ownership
Figure 1 shows the proportional representation of racial and ethnic groups within the regional population and within three measures of employer firms’ economic contributions, from 2017 to 2021. These proportions are based on the assumption that white, Black, Asian, and Hispanic groups combined make up the total. While the patterns remain relatively constant between 2017 and 2021, one notable trend is that the white population and white-owned proportion of employer-firm contributions increased in all categories.
These data paint a picture of white employers as dramatically overrepresented in Greater Philadelphia’s business landscape. On the left, we see that white residents make up 64% of the regional population in 2021, yet white-owned businesses make up 84% of the region’s employer firms, employ 90% of workers, and provide 93% of the region’s annual payroll. While Asians are somewhat overrepresented in terms of employer-firm ownership, they are at parity or underrepresented as far as number of workers these firms employ and their total payroll.
Estimates for Black- and Hispanic-owned businesses underscore the small space that these employer firms maintain in the overall business landscape. Black and Hispanic employers are very underrepresented in the region, with Black and Hispanic residents making up 21% and 9% of the population respectively, but less than 3% each of employer firm owners. Combined, Black- and Hispanic-owned businesses employ less than 5% of metropolitan area workers and generate less then 3% of the regional payroll.
Figure 1:
Source: 2017 and 2021 American Business Survey estimates
Greater Philadelphia mirrors national trends. Over the last decade, there has been a widening gap between the share of minority residents within the population and the share of minority-owned businesses [2]. The growth in the BIPOC population as a percentage of the country’s residents has outpaced the growth in BIPOC-owned businesses.
Regional Rates of Employer Firm Ownership
To elucidate this point further, Figure 2 illustrates employer-firm ownership for each group proportional to their population. Between 2017 and 2021, all groups increased their rate of employer-firm ownership. This was most significant for the Asian population, whose rate of ownership increased by 2.5 percentage points. However, the regional rate of employer-firm ownership stayed nearly constant.
As above, we see that Asian and white employers are overrepresented in the region, with more employer-firms per person than the regional average, while Black and Hispanic employers are underrepresented. In 2021, Asian residents are 12 times more likely than Black residents to own employer firms, while white residents are 8 times more likely.
Figure 2:
Source: 2017 and 2021 American Business Survey estimates
According to a Center City District report, this trend held across several major cities using 2017 ABS estimates [1]. In Atlanta, New York, Washington, and Boston, Asian and white residents are far more likely to own employer-firms than Black and Hispanic residents. In each of these five cities, Black residents have the lowest representation as employers. In all localities except for New York, Asians have the highest representation as employers.
Average Employee Payroll
Figure 1 showed clear disparities in the proportion of the regional payroll and employee count provided by employers of different racial or ethnic groups. In Figure 3, we drill down to average payroll per employee within each group of employer firms.
Between 2017 and 2021, average annual payroll increased by at least four percentage points for all groups. The largest increase in employee wages was from Asian employers, which increased from $30k to $47k in the four-year period. This jump brought Asian employers to the second highest payroll amongst the four groups, below only the white-owned average payroll. In 2021, the average annual employee payroll for a Black-owned employer firm is just over half that of the white-owned average, $31k to their $60k.
Figure 3:
Source: 2017 and 2021 American Business Survey estimates
Conclusion
While the data illustrate broad trends in representation across employer-firms, they fall short in helping us truly understand the landscape today, as they lack estimates for employer-firms by sector. This crucial detail would better demonstrate the strengths and weaknesses of BIPOC-owned business representation and could steer policymakers’ and investors’ support.
It remains difficult to make a concerted effort to promote inclusive and equitable growth in the local business ecosystem without current and accurate data. How has the landscape shifted since 2020? To what extent has business recovery varied between sectors? Answers to these questions will help policymakers determine how to better support Philadelphia’s small and diverse businesses going forward.
Sources
[1] https://www.centercityphila.org/uploads/attachments/ckdrsnu752hzmlxqdy3v7jdmh-business-density-report-2020.pdf
[2] https://www.brookings.edu/articles/who-is-driving-black-business-growth-insights-from-the-latest-data-on-black-owned-businesses/