Minority-Owned Firms Tend to Hire Within Own Ethnic Group

Minority-owned businesses in Los Angeles County overwhelmingly employ minority workers and tend to hire within their own ethnic group, a Los Angeles Times Poll has found--a trend with key implications for the region’s economic growth and unemployment rates, particularly in low-income areas.

Nearly three-quarters of Latinos surveyed described their work force as mostly Latino, and 41% of black business owners reported a mostly black work force. Of Asian firms, nearly a third employed mostly Asian workers, and almost as many had a mostly Latino work force.

In contrast, no more than 3% of any minority group reported a mostly white work force, compared with a third of white-owned businesses.

At a time when immigrants have been viewed as a drain on the economy, the statistics underscore a notable self-sufficiency among minority small businesses and the role they play in grooming the region’s minority employee base.

“The overwhelming number of workers in minority firms are drawn from those ethnic groups,” said Thomas Boston, a professor of economics at Georgia Tech University who has studied the phenomenon. “It’s those firms that are really generating jobs, particularly when you look at African Americans and Hispanics hard-pressed for employment.”

The propensity for ethnic employers to hire their own is influenced by a variety of social and demographic forces. They include reliance on existing workers to bring in new recruits, more activist tendencies of minority employers to hire and train workers who share their background and the composition of the work force, made up of a high number of immigrant Latinos who are concentrated in low-skill industries.

But The Times survey also revealed that ethnic hiring trends do not benefit all equally: Black businesses were the only ones likely to employ blacks in any measurable number. Fully half of those surveyed reported a mostly or partly black work force--with 41% describing their work force as mostly black--compared with only 1% of Latino ventures, 3% of Asian-owned firms and 4% of white-owned enterprises.

For blacks--whose 8.7% state unemployment rate in August surpassed that of all other groups--the good news is that significant job opportunities can be found with black-owned firms, even those that have fled low-income neighborhoods for the suburbs.

Yet the data also underscore the virtual exclusion of blacks from the small-business work force here. Small enterprises employ more than 70% of the county’s 4 million payroll workers, according to state figures, but only 5% of the county’s small businesses were black-owned, according to the most recent Census Bureau figures.

Still, experts in minority entrepreneurship say the opportunities should not be minimized.

“Even though today the employment capacity is relatively small, black-owned firms . . . are growing twice as fast as all small businesses,” Boston said. “If that trend continues for the next 10 years . . . then you begin to see something significant.”

Furthermore, minority-owned businesses are more likely to recruit in low-income neighborhoods and participate in programs to assist youth and welfare recipients, according to recent research by the Washington-based Joint Center for Political and Economic Studies.

“They’re playing an important role in giving people entry-level jobs because they’re willing to take risks, take people who may not have that much work experience and engage in some training,” said Cecilia Conrad, an associate professor of economics at Pomona College who is helping with the study.

Though black workers are underrepresented at small nonblack ventures, the survey found Latinos were employed in significant numbers by all groups. Latinos were the only minority group employed in large numbers by whites: 19% reported a mostly Latino work force and 9% a partly Latino work force.

Phillip Shin, owner of York Engineering in Highland Park, employs 13 people at his plastic injection molding company. Most of them are Latinos. Shin, a 45-year-old Korean American, says he never sought to hire a particular ethnic group, but his employees reflect the predominantly Latino area where the firm is based.

Demographics play a role. Latinos comprise 41% of the county’s work force--surpassing whites. In contrast, blacks make up only 8% of the county’s work force and Asians comprise 12%, according to 1998 census data.

Disparities in educational level have helped leave Latinos at the lower end of the work force and propelled blacks into public sector and professional jobs: Forty-five percent of Latinos in the California work force had no high school diploma in 1998, compared with 7% of blacks, state figures show. In contrast, fully 24% of blacks in the work force had a bachelor’s or higher degree, compared with only 8% of Latinos.

Another factor is human nature itself: Employers tend to favor workers most like them, research has shown, in part because they rely on community groups, churches and referrals from existing workers to fill new openings.

For small ventures--with no human resources departments and limited ability to screen applicants--turning to the existing work force to recruit new employees can be a necessity.

“I’ll never take a walk-in,” said Garland Burrell, whose G & I Liquor on West Slauson Avenue employs four people--three of them African American like Burrell. “You don’t know anything about them.”

Complete poll results are online at https://www.latimes.com/timespoll. They will be discussed at The Times’ Small Business Strategies Conference Sept. 24-25 at the Los Angeles Convention Center. For more information, call (800) 350-3211 or go to https://www.latimes.com/sbsc.

Special Report: State of Small Business in L.A. County

WEDNESDAY, Sept 15: Small businesses in Los Angeles County overwhelmingly are enjoying brisk business, but more minority than white-owned companies are struggling. A new generation of Latino businesses is challenging tradition.

THURSDAY, Sept 16: Black are much more likely than other ethnic minorities in the county to be considering relocating their firms.

FRIDAY, Sept. 17: Why Chinese and Korean entrepreneurs show vastily different success rates.

TODAY: Minority-owned businesses in Los Angeles County overwhelmingly employ minority workers and tend to hire within their own ethnic group.

BOOST YOUR BUSINESS: Get insights, advice and inspiration for your business at The Times’ Small Business Strategies Conference on Sept. 24-25 at the Los Angeles Convention Center. For more information or to register, call (800) 350-3211 or log on to https://www.latimes.com/sbsc.

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How the Poll Was Conducted The Times Poll surveyed Los Angeles County small-business owners--with an emphasis on minorities--from May 26 through Aug. 19. Questionnaires initially were mailed to 875 Asian, 875 Latino and 875 African American owners. Interviewers called those who did not return the mailing. The response rates were 59% (432) for African Americans; 52% (394) for Latinos; and 53% (401) for Asians.

In the survey’s second phase--an overall sample of the county’s small companies, 683 owners (including 353 whites) were interviewed out of 1,500 randomly selected businesses contacted by phone Aug. 4-19. The overall county response rate was 58%.

Those surveyed were selected at random from Dun & Bradstreet’s business database. Companies that were no longer in business or that could not be located were deleted, which affected response rates.

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Minority Hiring

A Times survey showed that minority-owned small businesses in Los Angeles County overwhelmingly employ minority workers. Black businesses are the only firms to hire blacks in substantial numbers; Latino workers, by contrast, find employment with all ethnicities.

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Source: Los Angeles Times Poll