Economic Outlook - january 2008

The impact of blacks on the state economy should grow by more than a third between 2004 and 2009, according to a study done by the Frank Hawkins Kenan Institute of Private Enterprise at UNC Chapel Hill and funded by the North Carolina Institute of Minority Economic Development. But if Tar Heel businesses don’t wise up, gains by blacks could end up in other states, says James H. Johnson Jr., a study co-author and professor of entrepreneurship at Carolina.

You're projecting 34% growth in five years?

That’s right — $44.7 billion to $60 billion.

That seems pretty optimistic for any part of the economy.

North Carolina is a magnet for the migration of middle- and upper-class African-Americans retiring back to the state. We’re also assuming that black businesses will continue to grow.

What was growth in the five years before?

We did 1990, 2000 and 2004. Total economic impact in 1990 was $19 billion. It was $37 billion in 2000 and $44.7 billion in 2004.

That's 21% in four years. So you expect growth to accelerate?

Well, migration is accelerating.

In which parts of the state economy is the black impact strongest?

Education and health services. Twenty-seven percent of blacks are concentrated there. Manufacturing has 17%; wholesale and retail trade, 11%; leisure, about 9%.

Which hold the most potential for growth?

Health care. We’ve got an aging baby-boomer population that’s going to have all kinds of health-care problems.

How well do Tar Heel businesses capture black spending power?

We have an enormous leakage — $5 billion — of consumer purchasing power out of the state. We’ve got to figure out how to forestall that leakage.

What causes it?

In many communities, goods and services that match the consumer purchasing preferences of African-Americans do not exist, or the quality of goods isn’t there. Or it could be that people are mistreated, so they vote with their feet.

How has the role of blacks in the state economy changed in the last 20 years?

We’ve had greater growth in white-collar occupations. We’ve had greater growth in the entrepreneurial community — still not up to standards with whites and other groups but pretty rapid growth. A lot of the people who are coming back to this state start businesses.

What have been the main barriers to black economic growth?

We have an enormous crisis in American public education, particularly impacting African-Americans. There are more African-American males in prison than in college. We’ve got to do something with K-12 education to assure equality of access to educational opportunities.

Have any new barriers cropped up?

Many African-American businesses grew because of preferential procurement programs and the like. Those programs are under legal challenge. If these businesses are to prosper, we’ve got to help them go global and compete without relying on minority set-aside programs.

You’ve found that each Hispanic resident, on average, costs the state budget $102 in health care, education and correctional services. The number for blacks is $420.

Corrections are 50% of the cost for blacks.

You suggest entrepreneurial training for ex-convicts because they’re unemployable.

A lot of these guys end up in prison because they were entrepreneurial. I’ve taught in the prison system. Some nights, I forget where I am. It feels like I’m in my MBA class. These guys understand strategy and marketing.

But can you trust that these guys want to go straight?

Well, if you’ve been in 18 or 20 years, it’s pretty clear. They have had a lot of time to think about this stuff. Drug dealing isn’t all it’s made out to be. Nobody likes watching their back every second.

Have things ever been better, economically, for blacks here?

Things are better for a segment of the black population. But there is a very large population of folks who have been left behind. Some people benefited from the changing opportunity structure in the ’70s and ’80s. I was one of them. What I worry about most is the kids that are in the K-12 system now. I frankly don’t think many of them have a shot.

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