Regional Report: State of Black Business
Arizona community leaders discuss Black business report
Local. Personal. Immediate.
Those were the three key messages from our latest Regional Report in which Black business leaders joined us to discuss findings from the inaugural State of Black Business Report for the State of Arizona, a study led by the State of Black Arizona.
“This report is long-awaited. And it is an attempt to move beyond talking to utilize the data and actualize our recommendations,” said State of Black Arizona executive director Teniqua Broughton.
Income disparities between Arizona’s Black community and the state at large are less pronounced than the rest of the country, but there remains a significant gap. The best way to help Black-owned businesses on an individual level, and by extension help more people begin to create a foundation of wealth, is to shop locally, take a personal approach and start doing it now.
“I believe that the time for talk is over. Studies, questions, great. But it’s time to do something,” said Black Chamber of Arizona President & CEO Robin Reed. “Just because you can’t do everything doesn’t mean you can’t and shouldn’t do something.”
- Teniqua Broughton, executive director, State of Black Arizona
- Drew Callow, research analyst, Greater Phoenix Economic Council
- Chris Camacho, president & CEO, Greater Phoenix Economic Council
- Robin Reed, president & CEO, Black Chamber of Arizona
- May Mgbolu, assistant director of policy & advocacy, Arizona Center for Economic Progress
- Oye Waddell, founder & CEO, Hustle Phoenix
- Moderator: Eric Sperling, managing director, Social Network Television
The report used Economic Census data from 2012 and 2017, the most recent comprehensive data from the U.S. Census about minority-owned businesses, to quantify areas of growth and drastic improvement in Black business focus areas.
“We haven’t seen a report like this in the state of Arizona probably in the last decade, so we’re filling a gap,” Mgbolu said. “Arizonans are looking for this information, they’re looking for ways to get involved and support their neighbors and their community. I think Arizona is going to continue to be a state that attracts people of color and especially the Black community.”
State of Black Business Report findings
Income inequality and buying power
The wage gap in Arizona remains significant. The median income for Black households is about $9,000 to $10,000 less than the statewide median, and about 25% of Black homes earn less than $25,000 a year, compared to 19% of households overall in the state. On the other side, 18% of Black homes earn over $100,000, while 26% of households across Arizona earn above that.
Despite that discrepancy, the state is actually outperforming the country as a whole. Nationally, the gap in total median household income is roughly $20,000, twice as much as in Arizona.
The region has managed to make modest progress because of the tightening labor market, rising wages in the area, an influx of skilled African Americans moving to Arizona, and the fact that Greater Phoenix has been one of the fastest-growing economies in the country over the last decade, Callow said.
Like the wage gap, per capita Black consumer buying power lags behind the rest of Arizona by about $7,000 per year. It has not kept up with the total growth of per-capita buying power in the state, and there is a risk that income inequality will continue to grow as a result. Yet the per capita buying power gap in Arizona is still smaller than the nationwide gap of about $15,000.
African Americans make up 3.9% of all consumer purchasing power in Arizona, below the proportion of its population, but this community is the fastest-growing consumer base. Black purchasing power is expected to increase another 41% over the next five years.
The study showed that African Americans, who make up about 5% of the state’s population and 5.1% of the workforce, have a slightly higher rate of labor force participation than the rest of the state. Sixty-eight percent of African Americans who are 16 years or older are actively employed or seeking employment, compared to the statewide number of 60%.
The jobs heavily skew toward the healthcare and administrative services sectors, which account for 30% of the Black workforce, and retail trade and accommodation and food services, which make up around 17%. This distribution is similar to the national distribution.
Arizona’s Black labor force has strong representation in the finance and insurance sector. This is especially true for Greater Phoenix. About 10% of the Black workforce in the region participates in this sector, compared to about 3% of African Americans nationwide.
“There’s a story being told there where African Americans in the state are getting more access to those job opportunities,” Mgbolu said.
With that said, the number of Black employees in government is substantially lower in Arizona than in the rest of the country. About 18% of the United States’ Black workforce is in government jobs, but that number is closer to 7% in Greater Phoenix.
“Growing up, many of us heard stories or learned early that it was safe to pursue jobs in government, maybe work for the Post Office or the airport, because historically, many of these government agencies were early adopters of anti-discrimination provisions, so this data is interesting,” Mgbolu said.
“For so long, for many African Americans, the public sector was seen as a pathway to middle class for the community. So it’s just interesting because this data is showing us a different story in Arizona.”
Business ownership paints a rather abstract picture – nearly 60% of all black-owned firms are under six years old, and only 12% are older than 15 years. Callow said there could be two reasons for this.
“It could indicate a growing, recent trend, an influx of Black entrepreneurship here. On the other hand, it could be indicative of systemic barriers to Black-owned businesses as they attempt to scale,” Callow said.
There is limited statewide data about entrepreneurship, but in 2019, African Americans had the lowest entrepreneurship rate of any racial or ethnic group in the country.
The number of Black business owners in the country decreased from about 1.1 million in February 2020 to 600,000 in April 2020, a decrease of 41%, said Broughton.
“We know that Black-owned businesses need more support. More access to capital, networks and other mechanisms for growth,” she said.
The importance of connections
Whether in startups, banking, real estate or elsewhere when navigating business, African Americans tend to face a shortage of connections.
For instance, only 1% of venture capital goes to African American-led businesses.
“What that tells me is that there is a lack of relationship and lack of understanding,” Waddell said. “The difference between wealth and poverty is relationships.”
There needs to be work on several fronts to address this.
“We can’t overlook the fact that businesses have to be bankable,” Reed said. “There’s so many great organizations here in the Valley that are working to educate our small businesses and give them the tools to become bankable. Because we can’t hold a bank responsible for not funding an unqualified applicant.”
The shortage of African Americans in the real estate market and construction management impacts the community’s ability to build equity through the housing market. Only about 2% of the Greater Phoenix Black labor force is in real estate, rental or leasing, and that’s a larger number than the national rate.
“Without that, the Black community isn’t hearing the story of the value of real estate, which then converts to why we are very low in terms of real estate ownership. Because we’re coming into the party after all the prices have gone up,” Reed said.
“We’re joining the party at the top of the market, so we’re not getting that equity that allows us to gain wealth through real estate ownership. So I think that to have more focus on growth in construction, sales and real estate finance would make a significant impact.”
Organizations such as Hustle PHX, the Black Chamber of Arizona, the State of Black Arizona, the Arizona Center for Economic Progress and GPEC can help provide insight and connections to financing and mentorship, but community members must take the first step.
“You’ve gotta reach out. You’ve gotta connect with us. We don’t know where you are and we don’t know where the need is unless you let us know,” Reed said.
Recommendations for business leaders
Diversifying a company isn’t simply for show. It has been shown to help with profits.
A 2020 McKinsey & Company study ranked companies into quartiles based on the ethnic diversity of executive teams and found that a business in the most diverse quartile had a 36% chance of financial outperformance.
“Here’s the thing: We don’t have to solve these problems sequentially. We can just take the action step of moving more minorities into management and executive positions while we work on removing biases,” Reed said. “There’s nothing that says you got to remove all your biases before a Black person can get promoted.”
The State of Black Business Report presented four ways for business leaders and government officials in the state to expand opportunities. Mgbolu provided context for each:
- Leverage research or conduct a study on the viability and retention of Black-owned businesses.
“This includes identifying the challenges, the needs, the trends and opportunities for Black business owners.”
- Leverage regional connections to drive internal and external investments.
“We know the local start-up community would benefit from coordinated efforts at promoting and targeting out-of-state venture capital firms.”
- Increase support for Black-owned businesses.
“This includes educational opportunities, direct financing and pathways to capital, start-up resources, collaborative research, and assistance in identifying and navigating business opportunities in the State.”
- Design a comprehensive statewide directory of Black-owned businesses in Arizona.
“The directory should include data on key economic measures such as revenue, growth margins, industry affiliation, number of employees, years of operation.”
Recommendations for you
Like Reed said, just because you can’t do everything doesn’t mean you can’t do something.
There can be seemingly small ways to assist that provide substantial impact. Learn more about prevailing problems in the system through literature and others who have first-hand experience. Waddell recommended “The Color of Money,” a book by Mehrsa Baradaran about Black banks and the racial wealth gap.
If there are ways to do so through your work, find avenues to help.
“Everyone in society has a role to play. Maybe you’re a teacher and there’s a young Black kid who thinks about becoming a business owner one day — what are the conversations you’re having with them early and often?” Mgbolu said.
“Maybe you are someone who is trying to attract more business S.T.E.M. folks or business engineers — intervention that you have done in high school and you started the moment they landed on your campus? Everyone has a role in this.”
Continue shopping at local, Black-owned businesses that puts money directly into the community. Visit Blax Friday to find Black-owned businesses that support your needs.
“I believe what that will create is momentum. I think the results from the momentum will prove how valuable this work will be. And I believe that we can truly accelerate all the work we’re trying to do if everybody will just commit to taking one step forward,” Reed said.
“The only way this report provides value is if we become action-oriented civic leaders that work to advance the provisions that are set forth in this report. And you can count me in to being a start leader that’s going to support the efforts,” Camacho said.