Minneapolis – Just after dawn last Wednesday, the smell of smoke lingered over the intersection of Lake Street and Chicago Avenue in Minneapolis. It's a major commercial thoroughfare, home to dozens of black-owned businesses. It's also eight blocks from where George Floyd suffocated beneath a police officer's knee and died on May 25. During the chaos that followed, dozens of Lake Street's buildings and businesses burned.
It was a serious blow to a community that's struggled for decades to achieve economic equality. In 2018, the median income for black households in the Minneapolis-St. Paul area was $38,200; for whites, it was $82,500. That’s a wider gap than for the United States as a whole, despite the area’s progressive reputation, a corporate community that's renowned for its civic-mindedness, and a robust regional economy.
Worse, it echoes a range of other depressing metrics — including gaps in employment, wages, education and business ownership — that make the Twin Cities one of the most unequal metro areas in the country. In some ways, these are very much local problems. But they also exemplify some broader long-term trends that have contributed to the current national crisis.
As I surveyed the damage, two questions in particular were bothering me. Why is Minneapolis's black unemployment rate more than four times that for whites? And why, in an area where corporations make such conspicuous efforts to support diversity, do black-owned businesses make up such a small part of the local economy?
Later that morning, I met up with Tawanna Black, an experienced business and philanthropy executive, in downtown St. Paul. In 2018, Black founded the Center for Economic Inclusion, which works to combat racism and inequality across the Twin Cities. With clients and partners such as Accenture Inc., the Itasca Project, JPMorgan Chase & Co. and Ramsey County (home to St. Paul), the group calculates metrics and indicators for inclusion and seeks to deploy them across the region.
We talked about the factors that drive economic inequality in the Twin Cities and beyond, and in particular how corporate America can do its part to reduce disparities in employment and ensure that black communities share in the nation’s prosperity.
Many of the problems, Black pointed out, were decades in the making. Beginning in the early 20th century, racial covenants prevented black residents from purchasing homes, accessing good schools and accumulating wealth in Minnesota and elsewhere. Progress has been made on some of these fronts: In the Twin Cities, at least, more equitable zoning policies are helping to ameliorate inequalities over time.
But there remain many less obvious problems that contributed to the pain and anger that have erupted since Floyd’s death. To take one example, the considerable corporate philanthropic efforts that the area is known for sometimes allow executives to punt on the harder question of addressing inequalities in their own organizations. Meanwhile, the Twin Cities — like a lot of communities across the U.S. — are increasingly home to large employers that don't deal directly with consumers, and thus are less responsive to community complaints and campaigns.
It adds up to a lack of accountability.
"I've heard some business leaders say we need somebody to give us the right proposal and ask the right question," Black told me. "I wrestle with that because I think the state of racial inequities is hurting everyone. In a city this size, this prosperous, we should be producing results. And if we're not, we should be asking ourselves, what does it take? And we haven't gotten to that point where it's not just a thing for ‘you people’ to go solve — as in people of color.”
Changing that mindset won’t be easy, because many of the underlying problems are structural — held in place by either government policy, strong corporate incentives or some combination.
Black points to low-income workers who lose government benefits when they reach a certain wage level. This sometimes forces them to choose between health care and a job, and makes it harder for employers to retain minority workers, a decades-old problem.
"More and more I find HR leaders and employers that want to work with government to change those systems," Black told me, but getting the political system to respond can be a huge challenge.
Another example involves contracts. Corporate America is often willing to fund organizations that train minority entrepreneurs, Black said, but when it comes to actually hiring them, those companies sometimes beg out "because I have large contracts and those businesses aren't big enough."
In fact, many national corporations have such burdensome contracting requirements that small businesses, especially those of color, simply don't have the resources to apply for them. As a result, more established competitors have a persistent advantage. "It's built in," Black says. "But structures are held up by people."
Fortunately, at least a few of those structures are being dismantled. Five years ago, when Minneapolis faced a community uprising due to a previous police killing, Target Corp. — one of the state’s largest employers — made a serious effort to address underlying inequalities in the area’s business community. It not only started contracting with very small companies in North Minneapolis, home to a large black community, but tried to eliminate burdensome language from the contracts.
That kind of thing is good for companies and economies both. But truly reducing inequality will also demand fresh thinking about job creation. Black notes that in the Twin Cities and other regions, black small businesses are heavily concentrated in areas like restaurants, catering, barbershops and hair salons. Those are important industries. "But chances are," Black said, 'the jobs those create aren't going to change our wealth gap."
Doing so will require more intentional support from big companies in sectors like tech. Several years ago, the Itasca Project, an organization that includes some of the Twin Cities' most important employers, created a program to encourage contracting with small local companies. There was a belief, Black said, that "those dollars would naturally trickle to businesses owned by people of color." She sighed. "Nothing trickles."
Now CEI is working with Itasca to add race-based goals to the program. That approach could prove transformative: According to CEI's data, if the rate of white and minority business ownership in Minnesota were at parity, the state would have another 87,000 jobs. That's reason for hope in the midst of some of the bleakest days ever faced by the Twin Cities. But will it lead to real change? Is it an inflection point for the region, and for American corporations? "It is, and it has to be," Black said. "And I pray that we pause in it long enough to create deep and sustained change."
Adam Minter is a Bloomberg Opinion columnist.
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