Joseph Addison once observed that even a stopped clock is right twice a day. As if to instantiate that claim, outgoing Chicago Mayor Lori Lightfoot has made a very good observation to the members of the African American Mayors Association, report on here at Crain’s Chicago Business by Judith Crown:
Noting that the city of Chicago procures $4 billion in goods and services every year, she said, “Surely some of those contracts can go to Black- and Brown- and women- and veteran-owned businesses. It’s different tools and levers that we can pull, but it’s all centered around equity and righting historic wrongs.”
The mayor may not be aware of it but 11% of city contracts are let to black-owned businesses, 14% to businesses owned by Hispanics, and 7% to businesses owned by “Asians”. I put that in quotation marks because I despise that classification, lumping as it does people from very different backgrounds into one single classification. Chicago’s population is 29.2% black, 28.7% Hispanics, and 6.8% “Asian” (no further breakdown to distinguish between Middle Eastern, Pakistani, Indian, Chinese, Japanese, Thai, etc.). I don’t much like the term “Hispanic” either but that’s a topic for another post.
In other words the city contracts let to black-owned businesses and Hispanic-owned businesses are substantially below their percentage of the population. Why?
There are actually several good reasons and none of them is directly related to racism: clout, business strategy, and fiduciary responsibility.
“Clout’, defined by Mike Royko 50 years ago as “political influence, as exercised through patronage, fixing, money, favors, and other traditional City Hall methods” is what accomplishes practically everything in Chicago and I have little doubt that it is essential in allocating city contracts. Clout depends less on what what your political influence is now than upon what it has been and will be. Chicago’s black population is declining and in all likelihood will continue to do so.
Racial “set sides” place minority-owned businesses in a peculiar situation. As these businesses grow they need to make a decision. They can depend on racial set sides until they reach a certain size and profitability. They can either stop growing or start competing with some very large businesses which potentially means they’ll get even less in the way of city contracts.
And, of course, believe it or not small elements of fiduciary responsibility actually leak into this tidy system. Even black-owned businesses must be qualified, i.e. they must have the skills and wherewithal to execute the contracts they’re receiving. Furthermore limiting the size a company can reach to remain qualified for racial set asides is a form of basing the decision on need.
So there you have it. it’s darned hard to let more contracts to black-owned and Hispanic-owned businesses.
Letting or subsidizing minority subcontractors would be of more benefit. That is if you want to injure them by making their subcontracts official and on the books, taxed and regulated.
Lot of them working for cash and happy with it.