WASHINGTON — Highly rated businesses in black neighborhoods sustain revenue losses totaling about $3.9 billion and do not grow any faster than low-rated businesses, a study released Wednesday by the Brookings Institution and Gallup found.
The study by Brookings’ Metropolitan Policy Program and Gallup is part of a larger project that evaluates the devaluation of different assets in black neighborhoods. In an earlier report, researchers found that when compared to similar homes in white neighborhoods, homes in black neighborhoods, on average, were devalued at a rate of 23 percent.
To examine the devaluation of businesses, researchers matched customer ratings on Yelp and data of the financial performance of businesses from the National Establishment Time-Series Database.
“This distortion of the market is robbing people and communities of profit,” said Andre M. Perry, a fellow at the Metropolitan Policy Program and an author of the study.
He also highlighted myths surrounding black entrepreneurs. “The notion that they [black entrepreneurs] are not there is false,” Perry said.
Perry said these issues exist because federal policy has devalued black communities.
On average, minority-owned businesses are rated just as highly or higher than white-owned businesses on Yelp, but businesses in black neighborhoods receive fewer reviews and are rated 0.2 stars lower on average, the report found.
Tynesia Boyea-Robinson, president and CEO of a company that seeks to achieve social benefits through financial investments, said supporting black-owned businesses helps close the racial wealth gap and generates income. She noted that a recent Association for Enterprise opportunity report found one-fifth of employed black people are employed by black business owners.
Jonathan Rothwell, a senior fellow at the Brookings Institution who contributed to the report, said that no matter the ethnicity of the owner, businesses located in black communities were still being devalued.
He said he hopes this report motivates people who don’t live in majority-black neighborhoods to think about how distorted their consumption decisions might be.
“Are there hidden gems they couldn’t otherwise find about?” he said. “And (they could) actively go out and find those restaurants and be a patron of them rather than going down the street to the one that everybody in the neighborhood is talking about or the one that has a celebrity chef.”