Closing the Black employer gap: Insights from the latest data on Black-owned businesses

In 2021, the number of Black-owned employer businesses increased by 14.3% (roughly 20,000 businesses) to a total of 161,031 employer businesses—the largest annual increase since the release of the first Annual Business Survey in 2017. However, despite Black Americans representing 14.4% of the population, only 2.7% of all businesses with employees were Black-owned in 2021—a minor increase of 0.3 percentage points from the previous year.

In comparison to other racial groups, the share of Black business ownership was disproportionately low.

White Americans owned 82% of employer businesses in 2021—a decrease of 0.6 percentage points from 2020—but represented 72.5% of the population. Asian Americans owned 10.9% of employer businesses—an increase of 0.4 percentage points—but made up 6.3% of the population.

As with Black business owners, Latino or Hispanic business owners made up less than their population share in 2021, owning 6.9% of employer businesses—an increase of 0.4 percentage points—while representing 19% of the population. Similarly, Native Americans owned 0.8% of employer businesses—an increase of 0.3 percentage points—but represented 2.6% of the population.

As shown in our previous report analyzing Black-owned employer businesses in 2020, Black women again propelled employer business growth. Although Black-women-owned businesses accounted for only 1.1% of employer businesses in 2021, they grew by 20.2%—outpacing Black-owned businesses overall (14.3% growth) and women-owned businesses (3.1% growth).

In 2021, Black-owned employer businesses had the highest percentage increases in the number of employees, revenue, and payroll among all racial groups. Growth for Black-owned businesses in these categories was typically 5% to 10% higher than other groups.

Revenue for Black-owned employer businesses increased by 30%, compared to 21% for Latino- or Hispanic-owned employer businesses, 25% for Asian American-owned employer businesses, and 18% for white-owned employer businesses.

Employer businesses hired fewer people in 2021 than in 2020: an overall decline of 4%. But Black- and Latino- or Hispanic-owned businesses increased their number of employees. Black employers provided jobs for 7% more people than in 2020, while Latino or Hispanic employers increased their number of employees by 2%. In contrast, the number of employees in Asian American-owned businesses shrank by 5%, and the number of employees in white-owned business declined by 4%.

Total payroll—the sum of financial compensation paid to all employees—also increased for Black-owned employer businesses in 2021. Black-owned employer businesses paid 27% more in total payroll than in 2020, which is almost 10% more than the next closest group, Latino- or Hispanic-owned businesses, whose total payroll increased by 18%. Asian American-owned businesses’ payroll also increased by 18%, while white-owned businesses’ payroll increased by 13%.

In 2021, the growth of Black-owned businesses was most substantial in metropolitan areas in the Southeast, with notable pockets in the Midwest.

The 10 metro areas with the highest rates of Black employer business ownership were all in the Southeast, with four in Georgia alone. Fayetteville, N.C. had the highest share, at 12.4%—still well below the metro area’s Black population share, which was 36.4%.

Heavily populated metro areas had the highest number of Black-owned employer businesses. Examples include New York, where 16,506 Black-owned businesses represented 3.5% of the metro area’s total employer businesses; and Chicago, where 5,606 Black-owned businesses represented 2.8% of employer businesses.

Although St. Louis had the 10th-highest number of Black-owned employer businesses in 2021, the metro area had lost 3,205 (52%) of these businesses since 2017—the largest total loss and the fourth-largest proportional decline.

Metro areas with the largest declines in the share of Black-owned employer businesses from 2017 to 2021 were not concentrated in a single region. The Lexington-Fayette, Ky. metro area saw the largest decline, at 68.1%, followed by the Gulfport-Biloxi-Pascagoula, Miss. metro area (66.1%) and the Springfield, Mo. metro area (52.6%).

This map shows the ratio of Black-owned employer business to Black residents for each metro area. The ratio is calculated by dividing the percentage of Black-owned employer businesses by the percentage of Black residents. The closer the ratio is to 1, the closer the share of Black business ownership is to the share of the Black population; the closer the ratio is to zero, the more unequal Black business ownership is relative to population share. Nationwide in 2021, the median ratio was 0.16—a far distance from parity.

Of the 160 metro areas surveyed in 2021, only two had a higher share of Black-owned employer businesses than Black residents: Corvallis, Ore. and McAllen-Edinburg-Mission, Texas. Black residents made up 2% of Corvallis’ population, and its 74 Black-owned employer businesses comprise 3.9% of the total. Black residents made up 0.8% of the McAllen-Edinburg-Mission population, with 118 Black-owned employer businesses comprising 1.2% of the total.

Sole proprietorships make up most businesses in the U.S. across all racial categories measured. In 2019, the most recent year of Census Bureau sole proprietorship data, 96.3% of Black-owned businesses were sole proprietorships—a total of 3.5 million businesses.

Sole proprietorships made up 97.4% of Black-women-owned businesses in 2019 and accounted for 97.3% of overall growth in the number of Black-women owned-businesses between 2018 and 2019.

Sole proprietorships contribute massively to our economy. In 2019, these businesses brought in $1.3 billion in revenue—6.2% of which came from Black-owned sole proprietorships, 11.7% from Latino or Hispanic sole proprietorships, 8.5% from Asian American sole proprietorships, 1% from Native American sole proprietorships, and 76.6% from white sole proprietorships.

In 2019, sole proprietorships played a crucial role in annual business growth. They represented 97.1% of annual Black-owned business growth, which was comparable to other business owners of color: 95.1% for Latino or Hispanic business growth and 98.7% for Asian American business growth. In contrast, sole proprietorships accounted for 76.5% of white business growth.

In 2021, the health care and social assistance industry represented the largest share of Black-owned employer businesses, at nearly one-third. This was followed by professional, scientific, and technical services, which represented 14.8% of all Black-owned employer businesses; this broad category includes engineering, veterinary services, and specialized design—all jobs that require technical training. The third-largest industry was administrative, support, and waste management and remediation services, which represented 8.2% of all Black-owned employer businesses.

The top industries for Black-women-owned employer businesses were largely the same, with a higher concentration in the health care and social assistance industry: 40.1%. The next highest was the professional, scientific, and technical services industry, which represented 13.2% of all Black-women-owned businesses.

In contrast, non-Black-owned employer businesses were less clustered: 14.4% were in the professional, scientific, and technical services industry, followed by 12.9% in construction, and 10.9% in the retail trade industry.