U.S. CENSUS BUREAU
TRANSCRIPT of NEWS
CONFERENCE ON:
"Minority-Owned Firms Grow Four Times
Faster
Than National Average, Census Bureau Reports"
MODERATOR:
LAVERNE VINES COLLINS
SPEAKERS:
DR. KATHLEEN B. COOPER
DR. FREDRICK KNICKERBOCKER
RICH STEVENS
RON LANGSTON
U.S. Census Bureau
Thursday, July 12, 2001
[Joined in progress.]
MS. LAVERNE VINES COLLINS: -- and the Minority Business Development Administration, to discuss minority-owned business data. We’re very happy to have you here today. Before we begin, a few housekeeping announcements. For those of you who are watching via the webcast, the press materials should be posted very shortly, and you can download those so that you can view them during the press conference. Also, after the presentations we will have a question and answer period. If anyone who is watching the webcast would like to submit a question, you may type it in and then we will see, time permitting, if we can address that question during the question and answer period.
It is my pleasure now to introduce Dr. Kathleen B. Cooper. Dr. Cooper now serves as undersecretary for economic affairs of the U.S. Department of Commerce. In this position, she oversees the activities of the Bureau of the Census, the Bureau of Economic Analysis, and STAT-USA, and provides economic policy support to the Secretary of Commerce. Dr. Cooper.
DR. KATHLEEN B. COOPER: Thank you very much, Laverne, and let me welcome everyone to today’s press conference, the purpose of which is to release the summary report of the Small Minority-Owned Business Enterprise, or SMOBE report, for 1997. In addition, the Minority Business Development Agency is releasing its analysis of these data, and a report entitled "The State of Minority Business." With me today is my colleague, Ron Langston, director of MBDA. In addition, along the table here, is Rich Stevens, also with MBDA, who will be talking a bit about that report, and finally, all the way to my right, is Dr. Frederick Knickerbocker, who is associate director for economic programs at the Census Bureau.
Let me kick off this session with just an observation or two. Although results from the Census 2000 data and the Census 2000 have taken center stage lately, painting a portrait of a more diverse America, we have an opportunity today to highlight some of the underlying and very dynamic changes that are taking hold throughout the American economy. We at the Commerce Department are very, very pleased to report that this portrait of the American economy shows rapidly expanding opportunities for minority entrepreneurs, and a much more diverse universe of small businesses. These data provide us the important opportunity to document and better understand the increasingly important role that minority-owned businesses play in our economy, in the U.S. economy. Given the fact that minority-owned businesses are particularly strong in retail, in wholesale, and the service sectors, there’s also good reason to believe that they will benefit from the President’s tax cut. This relief that is on its way will reduce the tax burden on households, and encourage opportunities for growth into the future.
With that very brief set of comments, I would like to turn the program over this morning to the experts on what we’re here to talk about today, on minority-owned businesses. I know that you’ll be in good hands with the three folks who are up here. The first person who is going to talk with you is Dr. Frederick Knickerbocker. Thank you very much.
DR. FREDERICK KNICKERBOCKER: Good morning. My task this morning is to explain to you, very briefly, the way that the SMOBE survey was conducted, that is to say, how did we gather the data. Then I’ll turn the floor over to my colleagues in MBDA who will discuss the findings and the implications of those findings.
SMOBE provides the only comprehensive source of data on minority-owned business enterprises. SMOBE was started as a small, special study back in 1969, and then it was incorporated into our economic censuses, censuses of business we conduct every five years back in 1972, so it’s been conducted every five years since 1972. Today we’re talking about the 1997 data. Why 1997 data in the year 2001? The SMOBE program, for a number of reasons, operates at about a two-year lag from the rest of the economic census program. The SMOBE survey relies on data collected in the rest of the economic census, and it collects on additional data that flows into the Census Bureau on a flow basis for a year or two years after 1997.
To be more specific, in order to conduct SMOBE, we make use of partial tax records to build up our sample frames, and the tax records we get flow to us during all of 1998 and into the spring of 1999. We also get information from the Social Security Administration. This information helps us to identify firms by race, ethnicity, and by gender. And again, that information flows to us through 1998 and into the spring of 1999. We then combine all that information with additional information we have from, say, prior SMOBE surveys, from lists we get from magazines, any other sources we can about minority-owned enterprise, and we generate our sample frames. The upshot of all of this is that we mail out about two and a half million questionnaires to companies to try to get the SMOBE data, and this mail-out is only completed in the middle of 1999, and the data collection is completed in January of the year 2000, so that you get a sense that we are building on prior data-collection efforts to get better information on minority-owned enterprise.
We collect, in SMOBE, information on virtually all non-foreign businesses with annual revenues greater than $1,000. We made a number of changes in the 1997 SMOBE -- relative to the 1992 SMOBE -- but perhaps the most important one is that we included, for the 1997 survey, full coverage of corporations, or what we refer to as C corporations, the publicly-incorporated company. Prior to 1997, the SMOBE survey only covered sole proprietorships -- the single individual running a business – partnerships, and subchapteresque corporations. It did not include C corporations -- as I say those were included for the first time in 1997 -- and I’ll come back to the implications of that in just a minute.
In terms of race and ethnicity, the 1997 SMOBE uses the definitions for race and ethnicity that were defined by OMB back in 1978. Those race definitions included American Indian or Alaskan Native, Asian or Pacific Islander, black, and white, and in terms of ethnicity, they included Hispanic origin and not of Hispanic origin. I make this point because I expect a number of you in the audience recognize that OMB revised its definitions for race and ethnicity in 1997, and as a consequence things like, say the 2000 decennial census, used a more elaborate concept of race in the collection of that data. But because of the timing of the 1997 survey, we used the older race definitions. In terms of the gender of business owner, we collected data for majority male-owned, for majority female-owned, and in a new classification, male and female equally owned companies. And there is one other category, which are publicly-held corporations foreign-owned and not for profit businesses, and this is a category where one can really not make – one can not identify either minority status or gender status.
Ownership is based on 51 percent or more ownership by race, ethnicity, and gender. That is to say that to attribute ownership of a company to a particular race, ethnicity, or gender category, we had to have evidence that the ownership was 51 percent or more. An additional innovation in the 1997 survey was that we did add this category of companies equally owned by male and female owners. Our unit of observation is the company, not the establishment, not the individual -- say plants a store -- but the company: that’s what we are collecting data from.
In any event, our data collection ended, as I say in the year 2000. Our products started to be released in March of 2001. We have seven publications in the entire SMOBE program. Six of them have now been released, one of them today. Those publications cover: one, women; next, African American; Hispanic; Asian and Pacific Islander; American Indians and Alaskan Natives; and the minority summary, the minority summary is being released today. There is also a company summary which will be forthcoming. To the issue of C corporations, that is to say the class of corporations that we only counted with the 1997 data, we identified 253,000 minority enterprises that were C corporations. They represent about eight percent of all minority firms, but they account for 43 percent of the receipts of all minority firms. In short, the C corporations, relative to sole proprietorships, partnerships, and chapteresque organizations, are much larger organizations. As I say, about eight percent of all minority firms are now C corporations.
Just a comment or two on gender. Our data show that women owned 30 percent of the minority business enterprises we identified for 1997. This compares to 26 percent for all American firms. Among all minorities, African Americans had the highest percentage of women-owned firms, at 38 percent.
Well, that’s sort of the methodology by which we put all the facts together, so let me turn to my colleagues who will discuss the findings, and then what it all means. Rich?
RICH STEVENS: Thank you, Dr. Knickerbocker. I’ve been with MBDA since about 1977, and this is – it’s always an exciting time to take a look at the new data from the survey of minority-owned businesses. This is, in fact, the fifth survey that I've been able to look at since I’ve been at MBDA, and it’s always a challenge to try to identify what the story is and hopefully find a lot of growth and development in the minority business sector. I want to first of all thank the Census Bureau staff for the cooperation that they’ve extended us over the past, actually 10, 20 years. I’ve known Valerie Strang and Eddie Solliers for that period of time, and we’ve worked together closely to make improvements to the SMOBE, to add more value of it for using it for research, for policy analysis, and for minority business development in general.
The 1977 SMOBE tells a very complex story, and it’s one that we’re going to better understand, I believe, in the next couple months as we begin to look in more detail at the data. But at least during the past couple of weeks, we’ve been looking at this information, and there is a clear story that’s emerging. And that is, in a nutshell, we see two factors that characterize the minority business sector. First of all, in general, there’s been a faster growth among minority businesses between 1992 and 1997 than with minority businesses. There were 3,000,000 minority-owned businesses generating close to $600 billion in gross receipts. Those are large numbers, granted, but what we need to do is put those numbers into the context of population, and into the context of the minority business, or, excuse me, the business sector as a whole.
All minority groups had a higher rate of growth in number of firms than non-minority firms. The non-minority firm growth rate in number of firms was seven percent during the 1992 to 1997 period. For African American businesses it was 26 percent; for American Indian businesses 84 percent, and for Asian and Hispanic businesses 30 percent. These numbers and tables are all in the report that you’ll be given that we did, particularly on chart one on page four. The second story that emerges from this is that there still remains a very large disparity in the relative level of business activity between minority businesses and non-minority businesses. And what I mean by business activity, is looking at businesses in terms of the over-all numbers, looking at their receipts, and looking at their employment levels.
Here’s a key statistic. In 1997, 20 percent of the United States population was made up of minority population. But at that same time, only about 15 percent of the businesses in the country were owned by minority businesses, so that rate is approximately half what the U.S. rate is. But these are two key factors to look at, and this is the scale issue or the size issue. Minority businesses accounted for only four percent of total employment generated by businesses in the United States, and only three percent of gross receipts generated by businesses in the United States. And if you have the report in front of you, the three percent figure can be explained, to some extent, by looking at Table one on that report. You’ll find in that, that the average gross receipts levels for the non-minority business sector, was somewhat over $1,000,000, but for minority business as a group, was less than $2,000. This is an important observation, I believe, for policy relevance, and I’ll discuss that a little bit later in some of my comments.
I want to briefly talk about three different dimensions or characteristics of the minority businesses sector, or the state of minority business as we see it today. First of all, the geographic concentration. It’s likely common knowledge that the minority population is concentrated in a few states. This is also true for minority businesses. As a matter of fact, minority businesses are concentrated, to a larger extent, in a few states than minority population. In one of the tables, I show a distribution of minority population, showing the total number of firms, that state’s particular share of firms, and what the cumulative percentages are. Four states: California, Texas, New York, and Florida, account for 55 percent of all minority businesses in the country; 24 percent, one fourth of all minority businesses in the United States, are located in the state of California. More than 80 percent of all minority businesses in the United States are located in 15 states.
This geographic pattern for business as I said, is similar to that of population, but even more so. We looked -- in this particular preliminary analysis, the geographic level is only down to the state level, but the census data, the SMOBE data, provides us with information not only for states, but for counties, for metropolitan areas, for rural areas, for cities. We’re going to look at those patterns in the next couple of months to see what kind of concentrations that we find there.
The next thing I want to talk about is the characteristics of firm size. And if you have the report and turn to page eight, I want to note a typo, an important typo that I found about 12:00 last night. At the top of page six on the second line, I’m reporting that micro-businesses, with annual receipts under 10,000, constitute 35 percent of all U.S. firms. That number is correct, but the number of firms – if you look at that number -- has a decimal point in there between the two fives; that decimal point should be converted to a comma. So the number is 7,385,583. Essentially what we’re saying there is if you look at all of the businesses in the United States that the Census Bureau is reporting, which is approximately 21 million, 7.3 or 7.4 million of those have receipts, and receipts under $10,000. So it is not unusual then, to find that minority businesses or most of the minority businesses would also have receipts in that small size category.
But there is some variation among the four major minority groups that we’re looking at. Actually, only 28 percent of Asian and Pacific Islander firms had receipts under $10,000, so that number is actually smaller than the national norm for all non-minority businesses. Forty percent of Hispanic owned-businesses had receipts under $10,000. Forty-one percent of American Indian/Alaska Native businesses had receipts under $10,000. But 49 percent, almost half of African American businesses that are reported in this SMOBE data, had receipts under $10,000 dollars. So as you can see, although we are reporting large numbers of minority businesses – in this case over 3,000,000 minority businesses -- almost 40 percent of those businesses had receipts under $10,000.
So that’s an important characteristic in terms of size. Now let’s go the other side of this scale. Of the census report, this SMOBE report, does give us some tabulations that look at minority businesses according to both gross receipts and employment size categories. We took a quick look at those receipt categories above $1,000,000, which I reported, in here in Table 6. For the country as a whole, all U.S. firms, about five percent, reported gross receipts in excess of $1,000,000. But for minority firms, only about 2.7 percent of the total number of minority firms reported receipts above $1,000,000. Now 2.7 percent versus five percent: those are both small numbers. But if we look at it in terms of the differences between the two groups, we can say that minority businesses have a level of firms that are in that larger size category that’s actually about half the rate of all U.S. firms. Just think in terms if there were some type of parity there, where if minority firms had five percent of their firms in sales above $1,000,000, then instead of having 84,000 minority-owned firms in that kind of size category, we’d double it to 160, 170,000 firms. So that’s an important factor.
Now one of the things that we’ll be looking at with the Census Bureau over the next couple of months is taking those size categories and looking at even larger groups. They’ll be doing some special tabulations of the data for us so that we can look at firms that are in excess of say five, ten, fifteen, a hundred million dollars. Another way of looking at the size factor for minority-owned businesses is looking at employee levels. In that same Table 6, we looked at the number of firms that had employment above 100 employees. For the country as a whole, there were 95, 000, almost 96,000 of those firms, but for minority businesses, only 4,400 minority businesses had employment in that larger category.
Let me turn next to the industry characteristics, which I begin, on page eight. Now this is an area where we’re going to have to do a lot of research over the next couple of months. What we did was just take an initial look at what are called industry divisions. These are the aggregate groups of construction, of manufacturing, public utilities, wholesale trade, retail trade. We know from our past research that we need to drill down into much more detailed industry levels. For example, the services industry. That’s a catchall for a lot of different types of firms, and there’s a big difference in looking at personal services firms which have been a traditional domain of the minority business sector since we’ve been looking at this phenomena since back in 1969 when census first started producing these statistics. So we will be dividing the services industry division into groups such as professional services and business services where in the past we’ve found substantially more growth.
I want to draw your attention just to key things in the two tables there related to industry, and that’s table 8 and table 7. Going first of all to table 8, if you look at all U.S. firms, the manufacturing sector has the highest average gross receipts level. I don’t think that’s probably much of a surprise to anybody because of the nature of the manufacturing sector. In that particular sector, the average gross receipts for manufacturing firms is almost $6 million dollars. But if we look across that table, no minority group comes even close to that level in terms of average receipts. For minority groups as a whole, the average receipts level is $991,000: for African American businesses, its $352,000; for American Indian, $373,000; for Asian and Pacific Islanders, $1.2 million dollars; and for Hispanic firms, $1.1 million dollars. So in the aggregate, minority-owned businesses in the manufacturing sector have average receipts that’s less than one-fifth the level of manufacturing firms for the economy as a whole.
There’s a similar pattern for wholesale trade, which is the major industry division that has—also has relatively high average gross receipts level. The average gross receipts in wholesale trade for all U.S. firms is $5.3 million dollars, but for all minority groups is $1.6 million dollars. We’re going to look into this in a little bit more detail. Some of the research that we did years ago when we looked at the 1992 data and then the 1987 data, showed that wholesale trade -- minority-owned firms in the wholesale trade industry were actually showing some pretty dramatic progress.
Let me turn your attention now to Table 7 on that same page nine. What we did there was take a look at the industry divisions reported by Census and looked at the share in a particular industry of total businesses in all industry groups, and there are a couple key points I want to make there. First of all, the manufacturing sector for all U.S. firms constitutes about three percent of all businesses. But if you look across that row, you’ll see actually American Indian, Alaskan Native, and Asian and Pacific Islanders, also that industry distribution is about three percent, but for African American businesses, they constitute only one percent of manufacturing of minority-owned business. So that’s really a rate about one-third of what the nation is as a whole. So just imagine if that ratio were similar; that would mean that the number of manufacturing firms owned by African Americans would triple.
So the bottom line for this is that the average gross receipts are lower in all cases. So again, it gets back to the scale issue. We’re seeing dramatic increases in growth in both number of minority-owned firms and in the gross receipts levels, and that’s good news; that’s something to celebrate. But we still have a long way to go in terms of reaching some type of parity and reaching some type of full utilization of entrepreneurial talent and resources in minority communities.
The last thing I wanted to mention, which starts on page nine of the report, is something called a business participation rate. The reason we included this section and the reason that we developed this particular measure -- some of you might be familiar with how the Bureau of Labor Statistics uses something called labor force participation rates, or you might often see in articles about medical conditions of populations that there are certain numbers of people in a particular population group that have a particular illness or, say heart disease, per every 1,000 -- we’re applying that same type of a concept to minority business development as a way of benchmarking and really comparing how different groups in different communities measure up against the country as a whole. The business participation rate essentially is the number of businesses in a particular population group for every 1,000 individuals or people in that particular group.
The national figure -- we turn over to page ten on Table 9 -- the national business participation rate for the non-minority population for the country as a whole is 91. What that says is for the non-minority population, there are 91 businesses for every 1,000 people in that particular group. If you look at that Table 9, you’ll see that no minority group exceeds that particular number of 91. Minority population as a group, as an aggregate, is actually less than half of what it is for the nation as a whole: it’s at 42. That says there are 42 minority-owned businesses for every 1,000 minority population. African American is at 24, Hispanic 41, and then American Indian, Alaskan Native population and Asian/Pacific and Islander come close to the national average at 91.
Now here’s another important variable, and I think this is going to have some significant policy implications for federal, state and local business development policy. We looked at the business participation rates for every state in the country and for every group, and we found an enormous range in what I call entrepreneurial activity or in as measured by business participation rates. For the non-minority population, the lowest business participation rate was 62; the highest was 203. For the minority population, the minimum in a particular state was 21, the maximum was 148. So that’s a lot of variation in levels of activities. In some groups, those ranges were even more significant. For example, an American Indian/Alaskan Native population, we actually found in one state, that the business participation rate was only 16. That means that there are only 16 American Indian businesses for every 1,000 American Indian population. And in another state, which actually was Kentucky, it went up to 512, but that 512 means is almost half of all Native American population in Kentucky owned a business.
Now, in fact, the numbers that were behind that -- we found that in Kentucky, the Native American population in Kentucky in 1997 was 5,995, but there were 3,069 businesses. So that’s why that number is so high. We will, in the next couple months, be developing these business participation rates down at a much smaller geographic level, certainly at metropolitan levels, where possible we’ll do it at county levels, and for cities. When we drill down to the smaller geographic levels, there are some problems with doing that because of what Census Bureau calls disclosure problems. When we get into really small samples, we really -- the Census Bureau really can’t divulge the information because there’s too much of a likelihood that it would provide information about a particular firm.
Now, I’m an economist. I don’t know if they’re any economists in the room. Numbers like this excite us, because what they do is create something called variance and what we want to do in the future is try to explain this variance. Why is it in some communities that business ownership rates are much higher than in other communities? Why in other communities are they much lower? And if we can -- if we can try to relate those variances and try to explain them through our statistical analysis and determine what the reasons are -- is it because there’s better access to capital in a particular community? Is it because there’s better access to markets? Are there better business support networks in place? Is there more of a culture of entrepreneurship? Is there an association with a university that has some type of an entrepreneurship program? Those are the kinds of things that we’ll look at. And if we see patterns that determine what success or what causes success, then we can develop policies and programs that can be replicated throughout the country.
So the bottom line is, it’s a mixed story. It’s a story that we’re just beginning to understand now. It’s a story that we’ll drill into deeper over the next couple months and really, the next couple years. We want to talk about these data with the trade associations, with those who are experts. We want to look at certain phenomena, for example, the American Indian extraordinary growth rates in American Indian businesses. We want to look into those and see if that’s a real phenomenon that’s occurring, or is it something that’s occurring just because more individuals are identifying themselves in census reports as being Native American.
I believe that is the end of my presentation. I’ll turn it over to my boss, Mr. Ronald Langston, who is the National Director of MBDA, to talk about what this means for the future of MBDA and for minority business to follow, development policy.
Thank you.
MR. RONALD LANGSTON: Well, good morning. How are you all doing? Well, I hope that’s a lot of information and that’s good information, so I’m going to talk about a little bit about where we’re going. First of all, I want to thank the undersecretary for coming down. She has a very busy schedule, so I greatly appreciated her and her staff for being present, and then Dr. Knickerbocker, particularly appreciate you and your staff being here. I want you all to know that when I first came to MBDA and one of my first meetings was with the Census Bureau. And I went out to Maryland and it was quite a place and they treated us very nice, so we’re looking forward to this continued relationship and Dr. Knickerbocker, isn’t he so professional? So distinguished. And Rich is an economist. The only thing that I know that’s more exciting that an economist are actuaries. I’m very happy to have Mr. Stevens. So thank you all for coming and particularly for taking the time to be here and to listen to a few of these comments.
I’m going to be very brief. I’m not going to be very bookish. My goal is kind of to put a little direction on where I think we’re going to go with this. As Mr. Stevens noted, we have made great achievements in this area. However, today’s data indicates there are challenges and there are opportunities. Clearly for MBDA, it is critical that we begin to focus on minority businesses of all sizes. We must continue to serve not only startup and small businesses, but also strengthening medium and large businesses, and that’s what’s the issue about scale.
The economic importance of minority businesses becomes quite apparent when you look at the nation’s demographics. So we need to talk about this demographic transformation. Minority communities will account for nearly 90 percent of the growth in the U.S. in the next 50 years. Currently they are 29 percent of the US population. California, the District of Columbia, Hawaii, New Mexico, already have minority populations exceeding 50 percent, so they are minority majority populations in their respective states. Texas is projected to join this group by 2015, and that we think it might be a slow counting; it might be even faster than that. In the near future, these four states and the District of Columbia represent more than 25 percent of the total U.S. population.
Now, although minorities comprise 29 percent of the U.S. population as we discussed, minority businesses constitute 15 percent of all U.S. firms, 4 percent of the employment base, and 3 percent of total gross receipts. So what is our challenge? Our challenge clearly is to change these numbers. While minority businesses of all sizes play a critical role in our economy, those that reach a critical mass that is scale, tend to generate more wealth and jobs and are better able to compete in today’s global economy.
As a result of the demographic and workforce changes, United States is facing what I term critical opportunity gaps in several areas. These gaps include: the gap between the current rate of growth and the rate necessary to sustain future long-term economic expansion, the gap between the growth of emerging domestic markets and the current rate of investment in such markets, and the gap between labor force growth and labor force participation. The failure to engage and systematically stimulate the growth of emerging businesses in the new emerging workforce will have serious consequences for the nation. Historically, minority businesses represent a significant source of employment for African Americans, Hispanics, American Indians, Asian/Pacific Islanders. While this change in demographics -- with these changes in demographics, minority businesses will become even more important at prospective employers.
Let’s talk a little bit about vision. There are several opportunities for MBDA to respond to the challenges presented by this information this morning. MBDA, as the primary federal agency responsible for developing minority businesses, has a critical role to play in empowering and in strengthening this segment of our economy. MBDA, in partnership with federal, private, public and non-profit sectors, must pursue development of new and emerging businesses, their enterprises and also seek to position, strengthen and sustain, developed businesses. You need to know that even though we’re going to focus on emerging businesses and startup businesses, there are a lot of businesses that are ongoing, that are successful. But they need help too and we can’t leave them by the roadside.
Specifically, the following must occur. Let’s talk about cultural and transformational change. MBDA must change its culture. To be effective, MBDA must transform itself from an administrative agency to an entrepreneurial organization, dedicated to the empowerment through entrepreneurship and innovation. As national director, one of my primary objectives is to enhance MBDA’s visibility and performance as an entrepreneurially focused enterprise. We are in the business of helping people become entrepreneurs. We are in the goal-setting objectives of promoting enterprise. So if we as organization do not act like an entrepreneurial enterprise, I think we’re missing the boat. Don’t you all agree with that? I see one amen here, so --
Specifically, we need to reinvent our regional and district offices into multi-purpose entrepreneurial innovation service and training centers. Now, that’s a mouthful, but what I’m talking about, is we must become national enterprise centers and regional enterprise districts. To bring together specialists in e-commerce, e-marketplaces, technology, and business strategies, we must link with historical black colleges and universities, we must reengage Hispanic, Asian, Native American, Pacific Islanders, and other minority-serving institutions, and we must really commit ourselves back to building ties with local chambers of commerce to provide practical, on-hands training and entrepreneurship. This is our client base.
Now, how are we going to do this? Let me talk next about internal and external partners. In addition to reinventing ourselves and just going through this transformation stage, it is critical to reconnect and reinvigorate minority trade organizations. I know we have several of them coming here today. I won’t name all of them, but I saw Ms. Sue Allen; thank you for coming. Okay. And I know we have Pete Homer with the Native American Association, and I hope that other groups are here. These groups have been in the trenches for years. They’ve been laboring. They’ve been working. They’ve been fighting the good fight and I think it’s time that we snap out of whatever we’ve been into and come back and get down in the trenches with you, and that’s what I’m committed to doing.
So again, this includes the U.S. Hispanic Chamber of Commerce, the National Black Chamber of Commerce, the National Independent Business Association, the Pan-Asian Chamber of Commerce, and many, many other organizations. I’ve had the pleasure to go around the country in the last 45-50 days, where there have been a lot of people at the local level, and they want to engage. So I’m going to be traveling a lot, but I’m not going to be in this bunker here, I’m going to be out. Let people take a look at me, because these organizations have tremendous, tremendous networks at the grassroots level. We must use these networks in an effective way to increase minority business participation levels.
So what’s the message here? It’s back to the grassroots: that’s the message. We have to go back to the grassroots. We have to rebuild from the bottom up, and we have to promote entrepreneurship. In addition, we must utilize the internal assets within the Department of Commerce, such as the Economic Development Administration, like today with the Census Bureau and their fine staff and expertise. We have the National Institutes of Standards and Technology, (NIST). We have the National Ocean Aquatic Administration, (NOAA). I plan to use these internal assets. I just found out that NOAA has about $14 million dollars for entrepreneurship for young people. Well, I think we ought to partner with them. Don’t you agree?
MALE: Absolutely.
MR. LANGSTON: Okay. I think we can certainly use their help and I hope they will welcome our expertise, but that’s an internal asset that we can build upon and utilize.
Third, we must begin to focus our attention in the regions and local communities where minority businesses need to be nurtured and strengthened. Again, our vision includes going back to the grassroots. Some examples: What I would like to do is I’d like to transform our minority, Native American business development centers into entrepreneurial business innovation centers. Again, reinvent, transform, adapt. This transformation will take our existing services and centers to a new level. They will be capable of preparing minority businesses for economic fluctuations by providing the tactical skills to survive as an entrepreneur. It’s simply not enough of us to train them how to do a business plan or finance plan, because business plans, finance plans go as get goes, okay? But if we teach them how to be entrepreneurs, how to survive as an entrepreneur, how to come back as an entrepreneur; that is the skills that we want to focus on.
Another area is access to capital. This area continues to be one of the most critical areas for minority businesses. I mean the data really shows that I think if we make the kind of aggressive investments through capital access, I think we can make some changes. Although there have been some gains, minority-owned firms are starved for capital --
[TAPE CHANGE.]
-- investment in minority businesses through greater access to existing products and the development of new and innovative financial instruments.
MBDA can play a critical role in this by encouraging financial institutions to penetrate this marketplace. Therefore, as national director, I’m very committed – and MBDA is committed – to assisting financial institutions and investors in general, in securing appropriate consensus to actively flow capital to entrepreneurs.
Manufacturing. Mr. Stevens talked about manufacturing, and this is a pet peeve of mine because I come out of the manufacturing industry. One of the areas that have a significant impact on minority entrepreneurs is manufacturing. Minority groups as a whole are grossly, grossly, underrepresented in the manufacturing sector. Manufacturing in America has historically served as a significant base of employment and wealth creation. The manufacturing extension program, which is a part of the Department of Commerce, provides management and technical assistance to small manufacturers. MBDA will establish a strategic partnership with the manufacturing extension program here at the Department of Congress, to develop a program that is focused on strengthening and supporting the increase of minority manufacturers.
Internet portal. We all know about e-commerce and technology, but finally, at MBDA, we will increase our market penetration to improve service delivery through our e-commerce portal. The minority business Internet portal will be the most comprehensive and technologically advanced communication vehicle focused on minority businesses. The portal will provide extensive information on access to market, access to capital, management and technical assistance, and education and training. The portal is an especially innovative tool. It can provide minority businesses and other users, and deliver customized information services to our client base. MBDA believes that the portal will provide minority businesses access to information, with the proper tools necessary to be competitive in this ever-changing global market.
So in conclusion, let me say a few things. Secretary of Commerce has asked me to lead. He’s asked me to utilize the full force of the Department of Commerce to make a difference in minority business community, entrepreneurship skills, and development. He and the President believe that true leadership is about caring for the welfare of others. The Secretary recently noted that when President Bush thinks about leadership, he thinks not just about the current generation, but future generations of America. Minority and emerging businesses represent America’s future. Prior public policy initiatives have focused on moving from welfare to work; however, I want to make it very clear that this administration is dedicated from moving from work to real wealth creation for minority businesses and minority communities. Now we have a great opportunity here, with great challenges before us, and I look forward to it. I’m happy for your great skills to answer any questions, and all of us, I think, are here to answer any questions. Again, I just thank you for coming; I look forward to visiting with you.
MS. COLLINS: We are now at the point where we will take your questions. There is a microphone for those of you in the room. If you would please come to the mike, identify yourself and your outlet, and again, for those who are watching via the webcast, you may type in your questions and we will try to address them. Who has a question? Yes, sir.
Q: Stevensons, with the National Minority Supply and Development Council. I’m just curious – given that the presentation, while excellent, deals with data several years old, is there any consideration about shrinking the amount of time between these census studies so that we can be more proactive based on the changing economic climate we’re living in now?
MS. COLLINS: Who would like to address that?
MR. LANGSTON: I’d be happy to take the lead now and yield later to Dr. Knickerbocker. We had a conversation with Census – again, they treated us so well there – and we would like to move towards an annual census, but I’ll let Dr. Knickerbocker talk about the pitfalls in that, the challenges in that, but we would like to go there. I think it’s a real cost to us, but we would certainly like to go there. So I’m all for that, provided we can do that within the confines and limits of what we have to deal with as far as resources. I think it would be more accurate, I think it would be more timely, but I know there are some constraints there.
MS. COLLINS: Dr. Knickerbocker?
DR. KNICKERBOCKER: We requested funds in our fiscal year 2001 budget to start an annual survey of minority-owned business, and that request was turned down by the Congress. There is no comparable initiative in the 2002 budget, but again, there are no initiatives in the budget for any organization, not just a bunch of the new administration. Whether something would surface in 2003 would remain to be seen. We requested the funds in 2001: the congressional language relating to that said that if there were to be funding, that should be asked for, vested in the using organization, MBDA, SBA, some other organization. It is an issue we are well aware of.
The data are delayed, as I said, because of the need to create the sample frames. When we mail out the two and a half million questionnaires, we are mailing to firms where we have a high probability of believing that they are minority-owned enterprises. If we were to not to go through the, I grant, lengthy process of developing our sample frames, we would be mailing out, as it were, in the blind, as to say to firms we do not know whether they are minority or not. In order to get statistically reliable data, we would have to double, triple, quadruple the number of questionnaires we would mail out. That would lead to the three to four-fold increase in the cost of the program. And secondly --again, a major consideration in our minds – is that this would also lead to an increase in burden on American firms. An awful lot of American companies would be getting questionnaires that are totally unrelated to minority-owned enterprise.
So, yes, I grant you that this is a lengthy process; I share your frustrations. We’ve made one attempt to rectify that on Congress. It remains to be seen if we will go forward from that standpoint. Will we change the methodology, this rather lengthy methodology? At this juncture I suspect not because this in turn would force us to go to Congress and simply say we want to do it for a great many million more dollars, and also increase the general burden on all respondents. So this is not a satisfactory answer, but we’re sort of stuck where we are at the moment.
MS. COLLINS: Also, I neglected to recognize Valerie Strang and Eddie Solliers who were mentioned earlier, and they are the key analysts of the SMOBE data at the Census Bureau. And they are on the front row if you have questions for them. Yes, sir.
Q: Good morning. My name is Pete Homer, and I’m the presidency over the National Indian Business Association here in Washington, D.C. This has been a very, very good meeting – informative – and I thank you very much. Good to see you Mr. Langston. And Mr. Stevens, you mentioned numerous times in your presentation, American Indian, Alaskan Natives, and Asian and Pacific Islanders. Indian country, who we represent, would like to break that out to American Indian, Alaskan Natives statistics and data in future reports. Is there a reason why or can you do that – is that very hard to do? We have nothing against the Asians – they’re wonderful people – but for our own purposes, because we’d like to know how many loans we’re getting, and we want to know what tribes they are and where they’re at, and we sort of live in our own communities out there, so, you know –
DR. KNICKERBOCKER: Let me confirm with our staff here, but I think, in the case of the 1997 SMOBE, we did release a separate report on American Indian and Alaskan population, a report separate from Asian and Pacific Islanders.
DR. COOPER: And I believe the news release, at least, is in the press kit, actually for each of the groups.
MR. STEVENS: That’s correct, and in this preliminary analysis, we do have separate headings for each of the groups –
Q: Are the numbers available?
MR. STEVENS: -- in the tables, yes. And then the specific numbers are in the individual reports that the Census Bureau released about a month ago, and also on their website too. And our next analysis – we’ve found when we’ve done research in the past, even the terminology for example, for say, Hispanic, to really get insights into the actual activity there we need to drill down even further. And Census does provide information that breaks into the subgroups, both for Hispanic and for Asian American. So we’ll be looking at those also.
MS. COLLINS: Eddie or Valerie, do you have anything to add to that? Okay. Also for those of you who would like to know what the URL is for the Census Bureau’s website, it’s www.census.gov. Sir?
Q: My name is Miguel Sanbovar. I have been very impressed with the activity of the Census Bureau to determine the population, but I wonder did you ever stop to think, that we as Latinos are of African descent too? I wonder how many Latino business people are of African descent, or they are counted as African American or as Latino. Do you believe that all those information must be disseminated to the population so they can take advantage of that and work together for American training and prosperity and…. What is your response?
MR. LANGSTON: Well, yes, of course…. I think the Latino community is benefiting from our numbers. There are a lot of Latinos of African descent, and I think they got a bug from us, so I’m glad you asked that question, but we need to probably bifurcate that somehow, but I’ll yield to the Census Bureau on that.
DR. KNICKERBOCKER: Well, first off I think you are raising a question about the population count, the decennial 2000 population count, and the procedures to identify race and ethnicity in Census 2000, differed from prior decennial censuses. New definitions were instituted, and as a consequence, for the first time in the decennial census respondents had an opportunity to identify themselves in multiple ways. As a consequence, one could identify oneself as a Hispanic or a Latino, and also identify oneself as being African American. Indeed, the manner in which the data were collected permitted individuals to respond in 63 different ways, in other words 63 different combinations of, in some sense, race and ethnicity. So I think that the population data collected in 2000, which is being published right now, will be responsive to your concern. And I’m quite certain that as the data comes out, there will be breakdowns of say, the Latino population by racial category as well, so I think that that will be responsive to your concern.
When we next -- as I indicated, the racial and ethnic definitions that we used for the 1997 SMOBE were the old ones. For the 2002 SMOBE, we will also use the new definitions, that is simply to say, a richer definition which would permit somebody to identify himself or herself as both being say, Hispanic and African American, or Hispanic and of Asian ancestry, or something like that. That quite frankly poses problems for us because it – particularly when you get to companies with multiple owners, and you offer so many different ways to identify the race and ethnicity of ownership -- it gets increasingly problematic how we identify that particular enterprise. But this is to simply indicate to you, Sir, that we are moving forward in the way we count businesses comparable to what we’re doing in population.
SR. SANDOVAL: Thank you very much.
MR. LANGSTON: Thank you Senor Sandoval.
DR. COOPER: And the other thing I think that everyone has to keep in mind is that both for the SMOBE survey as well as the decennial census, it is how the person identifies him or herself, it is not something that the Census Bureau has come up; it is a self-identification. I saw another hand.
Q : Stevensons, again with the National Minority of Supply and Development Council. I want to applaud the MBDA on this notion of looking at and supporting medium and large businesses. That’s the first time I’ve heard it being said by a director, and I’m hoping that that will actually happen. But I’m curious in asking Mr. Stevens, in terms of your time line, in terms of, as you said, drilling down, because we’re very curious, we have some ideas in terms of why so many minority businesses are at the $10,000 contract level or less. But we hope that -- NMSDC stands ready to work with you, and the MBDA, and the Census Bureau, to get some statistical and accurate information in terms of some of these reasons, so that we can work on and propose, whether its legislation or regulations or training or other things that might grow these businesses, because as we move into a global economy, size does count. Do you have some sense of when you would be complete with the next phase of your analysis and be able to report some of this information out?
MR. STEVENS: We are going to work with the Census Bureau over the next couple of weeks and months to get additional tabulation, particularly with the larger-size category, and our intention is -- can I make a commercial about MED week here? At MED week -- you look in the back of our analysis report, I have the website for MED week -- for those of you who are not aware of it, it’s Minority Enterprise Development week which is here in Washington, D.C., September 23 through September 26. And in the opening session of that, it will be on the topic of the state of minority business, so we will be expanding this report, looking at some more of these issues, so that we can discuss them more fully at those sessions. I doubt very much if we’ll have all of the answers, but we will have a lot more answers.
MS. COLLINS: The gentleman in the rear? Yeah.
Q: I’m Jim Burn, I’m editor of Minorities in Business Insider. Two questions, both for Mr. Langston. This agency has been absolutely bled-dry in the budget process in the last decade, and you’ve reduced your district offices, I think, from somewhere around 120 to about 38 now or something like that, and I’d be interested in how you feel you’ll change those into these entrepreneurial centers. I mean, you’ve really been reduced badly in resources. The House Appropriations Committee on Tuesday – I haven’t checked yet to see what they did with the Guardian BDA -- but they voted, and that’s probably pretty much going to be the final number. That’s one question; another question is a lot touchier. This agency has had the reputation of freezing-out Hispanic businesses over the last decade or so, and people make jokes about going to meetings and seeing no Hispanics at them, and I’m wondering, is that something that has been brought to your attention? Are you sensitive to that accusation?
MR. LANGSTON: On the Appropriations side, I am now working with our 2003 budget process, and asking for some very critical and what I consider substantial changes on our budget authority levels. Because that’s still in process, I can’t detail that right now, but as part of the transformation and reorganization, Sir, I have put forth some plans to rebuild. I’m glad you asked the question because clearly, MBDA, we are in a rebuilding mode, and if we don’t rebuild, we really can’t provide the kind of services I think we need in going forward, for new and emerging businesses, and also sustain existing businesses. So we have to rebuild, and I’m making that case internally here within side the department up through their appropriate channels in the Secretary’s office. So your assessment is correct; that’s the assessment that I learned upon coming to this office. The last eight years as far as MBDA is concerned have not been good years, frankly, and that’s not a partisan statement; that’s just a fact. A little bit more history: the Office of Minority Business Enterprise, the predecessor to this office, was started under the Nixon administration, and I think at one time we had a $70 million appropriation; we’re now at $28 million. So there’s been a decline, so we must rebuild, and my staff knows that we have been working on a rebuilding strategy.
In regard to the Hispanic question, being freezing-out, I hadn’t heard those words, Sir. What I’ve heard is that there’s been some concern about the African American Hispanic relationship, and to a lesser extent, the Asian community relationship in the African American community. I think that’s all a function of leadership, Sir, and I can say categorically I’m here to serve all the interests. I think it is very important for the African American leadership and Hispanic leadership, in particular, to sit down and work out any concerns they might have. But I can say categorically, that I am very interested in a very positive -- and I do believe I do have – developing a very strong relationship with the Hispanic community. But nationally, we need to look at what we all have together. We are still a nation of immigrants, and we can still do great things in this society and this country, and I think it’s a function of leadership. So as long as I’m in this chair, the Hispanic community and Asian community has nothing to worry about from me. I’m from Iowa; we love everybody now, so, okay. Thank you for the question, though.
MS. COLLINS: Last question.
MR. LANGSTON: And I’ll be here afterwards if people want –
Q: Hi, my name is Michelle Simpson, I’m from the Washington Afro. To segue into what you said about us being a nation of immigrants; what about the Afro Caribbeans? I mean, I’m specifically looking at the African American population. I mean, looking at the surveys, it’s less than the others, and I was just wondering what are we going to do to improve and increase the number of African American business owners, as well as what about Afro Caribbeans? Are we counting them as part of the African Americans, or are they just being – or just not counted as well?
MR. LANGSTON: If they’re in the United States and they got a residence, they should have been counted in the census. But let me answer your broader question.
DR. COOPER: And they would have been counted as African American or black?
MR. LANGSTON: Right. I am very impressed with the Afro Caribbean community historically. You can go back to Harold Cruse’s book, The Crisis of the Negro Intellectual. There is a great essay in one of his chapters about the West Indian and Caribbean culture. And if you look at African Americans in the country, the West Indian and Caribbean have been the most entrepreneurial, out of New York, out of Florida, Chicago, and the West. So they clearly have contributed and so one should not think that because they are Afro Caribbean that we do not have a kinship or a feeling or a connection to them.
I was just in St. Thomas, not on vacation, but as a keynote speaker as part of a business engagement. I’m going to go back to the Caribbean. I want to go and work with the Caribbean and African initiative. One thing we don’t have, strong enough, is an Afro Caribbean – Africa connection for reverse direct investment. I’m very envious and jealous of the Asian community because they have reverse direct investment in their respective countries, Asian communities. Hispanic community, Latinos, have the same reverse direct investment. We don’t have that reverse direct investment back to Africa, and to a lesser extent, in the Caribbean. So that’s an area for change, that’s a further area for opportunity. So please let your editors know, if you want to visit with me one-on-one, that we plan on making sure that everyone is a full participant in that. Thank you for the question.
MS. COLLINS: Staff will be available to entertain any other questions that you might have.
MR. LANGSTON: Yes, I’ll be here. I’m not going to duck any questions on you. Come on up and ask me.
[END OF CONFERENCE.]
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