Enhancing Racial Diversity in Advanced Manufacturing Ownership: A Pathway to Sustainable Economic Growth

Enhancing racial diversity in ownership within the advanced manufacturing sector is not only a moral imperative but also a strategic economic advantage. Increased participation of entrepreneurs from diverse racial backgrounds fosters innovation, broadens the range of ideas and skills, and contributes to the expansion of manufacturing businesses and job creation in the United States. This diversity also stimulates competition and enhances product variety, which benefits consumers through lower prices and improved quality.

Federal Legislation Supporting Inclusive Industrial Growth

The Infrastructure Investment and Jobs Act (IIJA), CHIPS and Science Act, and Inflation Reduction Act (IRA) have collectively established a foundation for a more diverse and dynamic industrial landscape in the U.S. These laws aim to:

• Strengthen critical sectors such as clean energy and semiconductors.
• Promote inclusive ownership in key manufacturing supply chains.
• Align economic revitalization efforts with inclusion goals.

Despite political challenges and potential rollbacks of diversity initiatives, sustaining and expanding these legislative frameworks is essential to ensure continued economic transformation and inclusion.

Role of Non-Federal Stakeholders in Sustaining Progress

Federal spending has historically catalyzed industrial development but is insufficient alone to maintain momentum. Therefore, state and local governments, universities, philanthropic organizations, private investors, and corporations must actively contribute to advancing diversity and inclusion in manufacturing ownership. Examples include state-level semiconductor and clean energy incentive programs that persist independently of federal policy changes.

Current Landscape of Black and Latino or Hispanic Ownership in Advanced Manufacturing

An analysis of 2023 Dun and Bradstreet data reveals significant underrepresentation of Black and Latino or Hispanic business owners in key manufacturing supply chains supported by the IIJA, CHIPS Act, and IRA. These supply chains include electric vehicles, semiconductors, clean energy, and critical minerals.

1. Ownership Statistics:
   • Black-owned firms constitute approximately 0.5% of original equipment manufacturers (OEMs) and first-tier suppliers.
   • Latino or Hispanic-owned firms represent about 0.8% of these businesses.
   • These figures are substantially lower than their respective shares of the U.S. population (13.6% for Black Americans and 19.1% for Latino or Hispanic Americans) and their representation in manufacturing overall.
   • Electric vehicles and critical minerals supply chains show the highest Black ownership at 1.2%.

Performance of Black- and Latino or Hispanic-Owned Firms

Despite their low numbers, Black- and Latino or Hispanic-owned manufacturers tend to be larger than their white-owned counterparts in these supply chains:

• Median Latino or Hispanic-owned firms employ 18 workers and generate $2.2 million in annual revenue.
• Median Black-owned firms employ 10 workers with nearly $900,000 in revenue.
• Median white-owned firms have 8 employees and just under $500,000 in revenue.

Economic Benefits of Inclusive Ownership

Increasing Black and Latino or Hispanic ownership in these manufacturing supply chains would yield substantial benefits, including:

• More manufacturers and manufacturing jobs, strengthening the U.S. economy.
• Job creation without displacing businesses owned by other racial or ethnic groups.
• Expansion of market opportunities for diverse-owned firms alongside existing businesses.

For example, if Black and Latino or Hispanic ownership rose to match their combined population share of 32.7%, the sector could see:

• 6,321 additional manufacturers.
• 1.1 million new jobs.
• 31.4% increase in manufacturers and 31.3% increase in jobs within the 13 supply chains.
• 8.2% growth in manufacturing jobs nationwide.

Even modest increases to ownership shares aligned with national averages for employer businesses (2.7% Black-owned and 6.9% Latino or Hispanic-owned) would add:

• 1,673 manufacturers (8.3% increase).
• 153,525 jobs (4.5% increase) in the studied supply chains.
• 1.2% growth in total U.S. manufacturing employment.

These figures represent direct effects; indirect benefits include job creation in lower-tier manufacturers, service providers, and broader economic impacts through employee spending.

Strategies for Non-Federal Actors to Promote Inclusive Business Ownership

Addressing ownership imbalances is crucial for equity and economic innovation. Non-federal stakeholders can advance inclusion through the following strategies:

1. Leverage Federal Acts to Institutionalize Supplier Diversity
   • State and local governments should prioritize funding for manufacturers with detailed diverse supplier engagement plans, modeled after Commerce Department criteria for CHIPS Act funding.
   • Additional funding should be contingent on meaningful implementation of diversity plans.
   • Manufacturers supported by federal and state programs should actively partner with minority-owned businesses.
   • Public contracting preferences and incentives should reward OEMs that diversify supplier portfolios.
2. Encourage Inclusive Procurement Practices
   • Large manufacturers should incentivize procurement teams to diversify supply chains.
   • Banks and investors using Environmental, Social, and Governance (ESG) metrics should offer favorable terms to firms promoting diverse suppliers.
   • Large OEMs should consider breaking large contracts into smaller ones to increase accessibility for small, diverse suppliers.
3. Improve Access to Capital
   • Lenders and technical assistance providers should offer supply chain financing to alleviate cash flow challenges for small manufacturers.
   • State and local governments must enforce anti-discrimination laws to prevent biased lending practices.
   • Support Minority Depository Institutions and promote diversity in angel investing and venture capital.
4. Bolster Technical Assistance and Training for Diverse-Owned Suppliers
   • Increase state and private funding to compensate for federal cuts to the Minority Business Development Agency.
   • Expand the scope of APEX Accelerators to include private sector supply chains and tailor training for suppliers to large manufacturers.
   • Assist diverse-owned suppliers in expanding into new and related markets.
5. Strengthen the STEM-to-Startup Pipeline
   • Increase funding for STEM graduate education at historically Black colleges and minority-serving institutions, which are key sources of manufacturing startups.
   • Support research and programs addressing barriers faced by Black and Latino or Hispanic students in STEM completion.
   • Develop partnerships between large manufacturers and minority-serving institutions to diversify talent and startup ecosystems, especially in high-tech, renewable energy, and infrastructure-related manufacturing.

Alignment with Sustainable Development Goals (SDGs)

The initiatives and strategies outlined align closely with several United Nations Sustainable Development Goals, including:

• SDG 8: Decent Work and Economic Growth – Promoting inclusive and sustainable economic growth through increased manufacturing jobs and entrepreneurship.
• SDG 9: Industry, Innovation, and Infrastructure – Strengthening industrial sectors and fostering innovation via diverse ownership and advanced manufacturing.
• SDG 10: Reduced Inequalities – Addressing racial disparities in business ownership and economic participation.
• SDG 4: Quality Education – Enhancing STEM education and training pipelines for underrepresented groups.
• SDG 17: Partnerships for the Goals – Encouraging collaboration among governments, private sector, academia, and civil society to promote inclusive industrial development.

Conclusion: Equity as a Catalyst for Innovation and Economic Resilience

Racial equity and industrial policy are fundamentally interconnected. Inclusive ownership in key manufacturing supply chains is essential not only for fairness but also for revitalizing U.S. manufacturing and fostering a more innovative, competitive, and resilient economy. The IIJA, CHIPS Act, and IRA have laid a critical foundation. Sustained efforts by governments, investors, educators, and business leaders are necessary to advance these goals and realize the full potential of a diverse manufacturing sector.

1. Sustainable Development Goals (SDGs) Addressed or Connected

1. SDG 8: Decent Work and Economic Growth
   • The article discusses increasing manufacturing jobs and economic growth through more inclusive ownership of manufacturing businesses.
2. SDG 9: Industry, Innovation, and Infrastructure
   • Focus on advanced manufacturing, innovation, and strengthening industrial supply chains such as electric vehicles, semiconductors, and clean energy.
3. SDG 10: Reduced Inequalities
   • Emphasis on racial equity, increasing Black and Latino or Hispanic ownership in manufacturing to reduce economic disparities.
4. SDG 4: Quality Education
   • Support for STEM education at minority-serving institutions to strengthen the talent pipeline.
5. SDG 5: Gender Equality
   • While not explicitly mentioned, promoting diversity and inclusion in ownership and employment can relate to gender equality efforts.

2. Specific Targets Under Those SDGs Identified

1. SDG 8: Decent Work and Economic Growth
   • Target 8.3: Promote development-oriented policies that support productive activities, decent job creation, entrepreneurship, creativity and innovation.
   • Target 8.5: Achieve full and productive employment and decent work for all women and men.
2. SDG 9: Industry, Innovation, and Infrastructure
   • Target 9.2: Promote inclusive and sustainable industrialization and, by 2030, significantly raise industry’s share of employment and gross domestic product.
   • Target 9.5: Enhance scientific research, upgrade the technological capabilities of industrial sectors.
3. SDG 10: Reduced Inequalities
   • Target 10.2: Empower and promote the social, economic and political inclusion of all, irrespective of race, ethnicity, or other status.
4. SDG 4: Quality Education
   • Target 4.3: Ensure equal access for all women and men to affordable and quality technical, vocational and tertiary education, including university.

3. Indicators Mentioned or Implied to Measure Progress

1. Ownership Representation Indicators
   • Percentage of Black- and Latino or Hispanic-owned businesses among OEMs and first-tier suppliers in key manufacturing supply chains (e.g., 0.5% Black-owned, 0.8% Latino or Hispanic-owned).
   • Comparison of ownership shares relative to population shares (e.g., 13.6% Black population, 19.1% Latino or Hispanic population).
2. Employment and Revenue Metrics
   • Median number of employees and annual revenue of Black-, Latino or Hispanic-, and white-owned firms in manufacturing supply chains.
   • Projected increases in number of manufacturers and jobs if ownership shares increase to population parity.
3. Policy Implementation Indicators
   • Use of supplier diversity criteria in federal and state funding programs.
   • Number of manufacturers partnering with minority-owned businesses.
   • Access to capital and technical assistance for diverse-owned suppliers.
   • STEM education enrollment and graduation rates at minority-serving institutions.

4. Table of SDGs, Targets, and Indicators

Source: brookings.edu