From the Advocate

By Tara Lynn Gray 

August 2023

Understanding: The Entry Fee for Advocacy

Forty-six percent.

This is a statistic I’ve quoted before. It’s the slice of the pie owned by Hispanics or racial minorities for California’s 4.2 million small businesses.

That’s nearly half of the businesses that provide nearly half of all the private sector jobs in the state. It seems like a pretty important group to understand.

That’s why it’s so odd that a recent report commissioned by my office, “The State of Diverse Businesses in California”, is the first time that the State of California has taken a deep, quantitative look at these businesses. The 108-page economic report details the make-up and economic, fiscal, and social impact of diverse small firms in California. It’s a step forward in our knowledge of communities in California that we care deeply about and whose interests we talk about consistently, but that has remained marginal in terms of our understanding of their impact.

We commissioned this report in response to Governor Newsom’s September 2022 Executive Order N-16-22 that directed state agencies and departments to take additional actions to embed equity analysis and considerations in their mission, policies and practices.

My office exists to represent and elevate the voices of California’s 4.2 million small businesses. As our name implies, advocacy is a core part of what we do.

But you can’t advocate for folks who you don’t know, people who don’t intimately understand.

That’s why my office posits that the completion of this project is one first-step representation of the Governor’s expressed commitment to promoting equity across every agency in the state apparatus. We say that because we know that understanding takes effort. Insight has a cost.

I’ve been talking about and to and on behalf of minority-owned business communities across the span of my career. It’s safe to say that my knowledge of these communities and my representation of their interests is part of what propelled me to the position of Advocate I’m proud to occupy today. But while several ground-breaking national studies – especially since the COVID-19 crisis – have deepened our understanding of minority-owned businesses and the nexus between economic mobility and entrepreneurship, state-level data has always proven difficult to pinpoint and region or county-level data even more so.

Last fall, as part of a competitive proposal process, CalOSBA chose the state’s largest minority chambers to lead the project: the California Asian Pacific Chamber of Commerce, the California African American Chamber of Commerce, and the California Hispanic Chambers of Commerce. The team chose Beacon Economics as research lead and Small Business Majority to lead a roster of community-based partners, to collect data directly from California businesses and business organizations. “The State of Diverse Businesses in California” is the result.

I am happy to say that this report has deepened my personal understanding about the contributions of Asians, Hispanics. African-Americans and Native Americans to our state economy.

Key findings from the report include:

• Minority small business contribute nearly $193 billion in economic output per year, which is greater than the annual GDP of 18 U.S. states (2022 figures).
• Minority small businesses in California generate $28.7 billion in tax revenue each year.
• Minority small businesses support 2.56 million jobs annually across California.
• The Trade, Transport and Utilities is the business sector with the highest concentration of small minority firms (defined as employing 20 employees or less) is the with over 300,000 minority firms. (Sector includes wholesale trade, retail trade, transportation and warehousing, utilities).

Other findings are things we intuitively understand, but that are useful to quantify and articulate. For example, this map about Distribution of Diverse Businesses by Region from page 42 of the full report:

Or this chart from page 36 that shows that, although Diverse Businesses are plentiful in our state, they are not yet economically impactful on a par with white-owned businesses:

The truth is that while the total number of small businesses operating in California dwarves the next ranked state (Texas), California has ground to gain in terms of representation in our entrepreneurial ranks. Here’s a simple chart I calculated using data from the 2022 State Business Profiles published by the U.S. SBA Office of Advocacy and U.S. Census Quick Facts.  These five states have the highest percentages of minority business ownership (excluding the District of Columbia and the U.S. territories). What it shows is that while no state has equitable representation in business ownership compared to total population distribution, Hawaii and California have the most ground to gain.

None of this is necessarily surprising…diverse business-owners face barriers everywhere but these are even more formidable in states with the highest cost of living.

But comparing the impact of small businesses to their still unrealized potential does inspire me to commit to going even further, comparing data over time so that my team and our state can better understand the relationships between shifting populations, entrepreneurial activity and economic mobility.

At CalOSBA, we say that our role is to make sure that state-funded business support services get to communities in every zip code, especially the underrepresented ones.

That category is not confined to racial and ethnic definitions. But we know, as economic development professionals, that systemic barriers to access in every regard is blocking these diverse businesses from realizing their true potential: their economic potential, their social potential, their potential for human development AND their potential to bolster the state economy.

And now, quite simply, thanks to this first-step report, we can see diverse business-owners more clearly and understand them better. This means we can do a better job of advocating on their behalf. And that’s my jam, in my job, as a representative of Governor Newsom and in my own personal storyline.

Let’s keep going.

References:

• Executive Order N-16-22 (ca.gov)