Black entrepreneurs earn 32% less, and inequality challenges the new government

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Self-employed workers and black employers have less schooling, smaller companies and work more alone, shows Sebrae. With a history focused on formal and impoverished work, PT has the challenge of facing inequality also among “necessary micro-entrepreneurs”. Self-employed workers and black employers have less schooling, smaller companies and work more alone, shows Sebrae Fernando Frazão/Agência Brasil “We are going to boost small and medium-sized companies, potentially the biggest generators of jobs and income, entrepreneurship, cooperativism and creative economy”, promised President Luiz Inácio Lula da Silva (PT), in his inauguration speech, on January 1st. That same day, Lula also affirmed his commitment to “combating all forms of inequality day and night”, citing, among examples of these iniquities, disparities in income, gender, race and the labor market. A study by Sebrae (Brazilian Support Service for Micro and Small Companies) shows, however, that these are not separate agendas. According to the Entrepreneurship by Race-Color (and Sex) survey, black entrepreneurs earn less, have less schooling, smaller companies, work more alone (without hiring employees) and contribute less to Social Security. Black female entrepreneurs specifically were the most affected by the pandemic and the ones that took the longest to recover. Thus, in a country where 30% of the employed are self-employed or employers, the new government has the challenge of tackling inequality not only in the formal labor market, but also among the more than 30 million entrepreneurs, say economists. Born of trade unionism and successful in social policies for the poor, the PT faces in Lula’s third term the challenge of designing policies for a lower middle class of “microentrepreneurs by necessity”, whose vote largely turned to the right in the last elections . Self-employed workers and employers BBC Race and gender inequality among entrepreneurs According to the Sebrae study, blacks (black and brown) represent 52% of Brazilian entrepreneurs, considering self-employed workers and employers as part of this group. But, while black entrepreneurs had an average monthly income of BRL 2,079 in the second quarter of 2022, whites earned BRL 3,040. That is: the income of black entrepreneurs is on average 32% lower than that of white entrepreneurs. Considering the gender issue, black women have the lowest income among entrepreneurs, of BRL 1,852, compared to BRL 2,188 for black men, BRL 2,706 for white women and BRL 3,231 for white men, shows the survey of Sebrae. Therefore, between white male entrepreneurs and black female entrepreneurs, the average income gap is 74%. “Structurally, the country had a late insertion of women and blacks in the labor market, this applies to all professions and also applies to entrepreneurs”, observes Marco Aurélio Bedê, strategic management analyst at Sebrae and responsible for the research, about one of the reasons behind the pay gap between entrepreneurs. The economist observes that, in addition to this late insertion — a result of factors such as slavery and the inequality of social gender roles —, whites in general have higher education than blacks, which also affects their income level. This difference in education is noticeable in the profile of entrepreneurs: 41% of black business owners have only elementary school, compared to 28% of whites. Among entrepreneurs with higher education, 32% are white, compared to 13% black. Entrepreneurs’ schooling BBC Among women, despite the fact that they currently outperform men in schooling, there is the particularity of often working in the labor market to supplement the family’s income. Taking care of the house, children and the elderly, they end up dedicating themselves only partially to their businesses, which also impacts their income level. “And there is still the cultural question that, for the same activities, it is common to find women earning less”, observes the Sebrae analyst. Entrepreneurship by necessity The analysis of the profile of Brazilian entrepreneurs by race and gender makes it clear that most of those considered “business owners” are not really entrepreneurs by necessity — not those who create new companies based on disruptive innovations, but those who open small business to survive. Most do not even have employees, working on their own and offering the market only their own labor. Among black women, only 8% of women entrepreneurs are employers, compared to 11% of black men, 17% of white women and 19% of white men who can count on employees in their entrepreneurial activity. Within the small share of black employers, the vast majority (82%) have only between 1 and 5 employees. Thus, in addition to working more on their own, black entrepreneurs also have smaller businesses. Within the small portion of black employers, the vast majority (82%) have only between 1 and 5 employees Tânia Rego/Agência Brasil “Motivation by necessity is greater among blacks and is linked to low education and higher unemployment rate in this group “, says the Sebrae economist. “Who starts a business out of necessity, in general, starts with a gap in terms of training, time to think about the enterprise. Often, with less capital and in the spirit of despair”, completes the analyst. Bruno Imaizumi, an economist specializing in the labor market at LCA Consultores, observes that these are not the only problems faced by entrepreneurs out of necessity. “We have to remember that the self-employed worker, in general, has a very volatile income, very inconsistent from month to month. With less qualification, it will be more difficult for him to maintain his business, to get a higher income, to employ more people,” says Imaizumi. The difficulties faced by these entrepreneurs out of necessity are reflected in the low level of contribution to Social Security. According to the Sebrae survey, in the second quarter of 2022, 72% of black Brazilian entrepreneurs did not contribute to the INSS (National Social Security Institute), compared to 52% of whites. Thus, the situation of precariousness of these workers during their working age tends to be reproduced in old age as well, when they will have less income available through benefits. Challenges for the new government Inequality among entrepreneurs, a growing share in the Brazilian and global labor market, poses challenges to the new government, evaluates the Sebrae analyst. “It is clear that it is important to have a policy to support women entrepreneurs and, particularly, black entrepreneurs, so that these gaps can be reduced”, defends Marco Bedê. ‘It is clear that it is important to have a policy to support women entrepreneurs and, particularly, black entrepreneurs, so that these gaps can be reduced’, argues Marco Aurélio Bedê, from Sebrae Getty Images According to him, what needs to be done in this regard it still has to be defined, but it ranges from the expansion of the schooling level, passing through the provision of day care centers, training of entrepreneurs and policies of access to credit with less bureaucracy and less accessible rates. In 2022, between the first and second rounds of elections, the Jair Bolsonaro government even launched a Caixa Econômica Federal credit program for women entrepreneurs. Part of the former president’s package in an attempt to be re-elected, the program is still little known. For the Sebrae analyst, the beginning of the new government is a propitious moment for this discussion to enter the agenda. “We are at a time when the discussion is starting. The government that takes office, in the past, had a strong experience with reducing inequalities. We are at a time when they have increased again and it is necessary to move public policies to reduce them”, he says Bede. Bruno Imaizumi, from LCA Consultores, considers that the government has lacked a look at small entrepreneurs in recent decades. He recalls, for example, the policy of the PT governments of “national champions”, which prioritized investments by the BNDES (National Bank for Economic and Social Development) in large companies. “The pandemic, like it or not, marked a reversal of this trend in BNDES disbursements, which were turned to small and medium-sized companies. It could be a positive point if the new government maintains this policy adopted during the pandemic, focusing more on micro and small companies. companies, since they generate most of the formal jobs in the country”, defends the economist. For the analyst, ensuring the improvement of the business environment through structural reforms, such as tax and administrative reforms, would also be important to improve the economic scenario and strengthen entrepreneurial activity. From unionism to entrepreneurship out of necessity Sociologist Celso Rocha de Barros, author of the book PT, uma história (Cia. Das Letras, 2022), observes that this approach to micro and small entrepreneurs will be a challenge within the path of the PT, a party that was born linked to trade unionism. Ministers Simone Tebet (Planning) and Fernando Haddad (Finance) alongside President Luiz Inácio Lula da Silva Reuters “At some point between the 1980s and 1990s, Brazilian industrialization stalled and started to go backwards. Brazil would not become a ‘Great ABC’, and that the PT would need specific strategies to reach disorganized workers, especially those in the informal sector”, recalls Barros. He remembers that, at that time, there were a series of initiatives in this direction — it is here, for example, that the idea of ​​Bolsa Escola emerged, which would later become Bolsa Família — but he observes that the great approximation of the PT with the informal ones only happened even when Lula arrives in government and implements his social policy agenda. Now, the PT, back in power, faces a new challenge: that of making public policies that respond to the economic needs of a lower middle class, made up of self-employed workers and small entrepreneurs, who, to a large extent, moved away from the party towards Bolsonarimo. “This is a question that PT members often ask themselves. There is still no definitive answer, either in the PT or anywhere else, but I think that part of the issue is for the party to understand that workers in the service sector, or micro (very micro even) entrepreneurs have specific interests”, observes the sociologist. “They need the social policy safety net very much, but from then on they need the conditions to thrive, and those don’t always go through becoming an industry worker or a civil servant. There will be a long learning curve in how to deliver good policies. of credit for small entrepreneurs, how to regulate them without suffocating them.”

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