Economic Disparity: Is It Hurting New Orleans Business?

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Imagine – your family has the opportunity to own a beautiful home in a prestigious subdivision of town. You do everything you are supposed to do when you get a home – invest in upgrades, invest in maintenance, invest in the continued appreciation of its overall value. The time comes, and you are ready to sell. Your real estate agent tells you, “take down all the pictures in your house. We are going to do an appraisal.” You refuse. The result? An appraisal that is so low that the bank assumed your 3-year-old home was severely damaged or destroyed. The agent conducting the appraisal essentially took wealth from you, simply out of the racial inequity attached to discovering that your house was black-owned. This is a true story, as told from actor, celebrity, and political commentator D.L. Hughley.

For aspiring business owners and entrepreneurs, homeownership plays a critical role in establishing net worth – it has a leveling effect for economic viability. Assets, such as home ownership, contribute to an overall financial portfolio. In 2011, the United States median wealth of white household families was $110,000; for African Americans, the amount was just over $6,000. Homeownership played a large role in this inequality. By 2016, the gap continued with black families having a median wealth of $17,600 and white families having a median wealth of $171,000. Homeownership continues to play a leading role in the disparity.

The City of New Orleans 2018 disparity study examined if there is a level playing field for minority and women-owned businesses in City contracts. The study suggests that there is not a level playing field. The study also confirmed the following conclusions as it pertained to black New Orleanians, home equity and business development:

  • Fewer African Americans and Hispanic Americans owned homes compared with non-Hispanic whites
  • People of color who do own homes tend to have lower home values
  • High income African Americans applying for conventional home mortgages in the New Orleans metropolitan area were more likely to have their applications denied
  • Approximately 17% of business loans for minority and women-owned business were denied compared to 2% for non-minority male-owned companies

The City of New Orleans disparity study further indicated that there were substantial utilization disparities for minority owned and women-owned businesses in the marketplace. These businesses included anything from professional services, construction, goods, and other services. The study gathered feedback from minority-owned businesses who reported “skin color” as an advantage for non-minorities. There were reports of difficulties in establishing business relationships due to stereotyping issues, racial slander, and other general negative treatment that impeded upon business connectability.

The disparity study emphasized the importance of the City getting involved in order to slow the perpetuance of utilization disparities for women and minority-owned businesses. City initiatives such as the SLDBE (State and Local Disadvantaged Business Enterprise) are a way for the City to meet its own utilization goals. According to the City website: the City of New Orleans establishes an overall goal of 35% utilization of socially and economically disadvantaged businesses.”  The disparity study reported a 46.97% overall utilization; hence, the City of New Orleans exceeded its utilization goal.

In the face of managing economic disadvantages, attempts such as those made by the City of New Orleans on behalf of minority-owned business owners remain important – but are only a small measure of improvement.  Additional research conducted through the Prosperity Index provides insight on economic disparity through a broader lens. The Prosperity Index asks the following question: have black New Orleanians experienced increased economic inclusion since the end of the Civil Rights era (approximately 1968)? The Prosperity Index evaluates demographics such as employment and income, housing, health, democracy, education, and criminal justice. Lamar Gardere is executive director of the Data Center New Orleans and is the principal author of the Prosperity Index. He emphasizes the fact that contractual work from the city makes up an extremely small portion of the broader economy. In the attempts to establish economic parity, Gardere raises the following two questions:

  • Do minority-owned businesses get involved with a wide range of businesses? In this instance, minority-owned businesses would be performing across a few sectors of the economy rather than the broader
  • Do we have minority-owned businesses that participate across the broader economy, but they are not able to grow revenue in those businesses? In this instance, there are barriers to growth.

The Prosperity Index states that New Orleans has a 300-year history; 150 of those years included the institution of slavery and an additional 100 of those years included Jim Crow laws. It is only within the last 50 years that it has been possible for African Americans to have full inclusion in the greater economy. When processing the thought that today’s African Americans need to bear the brunt of responsibility in establishing their own parity as a community by doing things such as working harder, increasing their own business network, establishing their own businesses in greater varieties of sectors – Gardere cautions,

“An ‘individual’ line of thinking that puts the responsibility on the individual to essentially do the hustling and the work that is necessary to bootstrap your business – there is always going to be an element of that. However, it is important to recognize: of New Orleans 300 years, 250 of it had systemic disadvantages that were built in. Folks were intentionally being prevented from full participation in the economy…There are some systemic issues that would make it hard for any individual to simply outperform the disadvantage that the systems create. Not that individuals have not already done this. But I think it makes it harder to put the owness on the individual to perform hard enough, fast enough, work three or four times as hard – to make it. We need to find ways to account for systemic disadvantages that kind of rebalance the playing field.”

Additional research will help find strategic ways to attain economic equality through both the individual efforts from minority business owners and the systemic efforts, such as the City of New Orleans. Many leaders, such as Mayor Landrieu, feel the private sector plays a critical role in working in the direction of establishing economic parity. Per the Prosperity Index, “new research suggests that U.S. cities and regions that offer greater equality of opportunity experience greater economic growth, by maximizing the potential of their human capital, and minimizing the fiscal costs of exclusion.”

Nicole Nixon is a dedicated wife and mother who values leadership and business. Motivated by her husband and her son, she is vested in the empowerment and positive commercialization of black men in America. If you enjoyed this piece, you might want to check out her piece “A Mother’s Cry,” or her other articles here.

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