Understanding Houston

Category: Economic Opportunity

For blogs that talk about Economic Opportunity

  • Houston is… Entrepreneurial

    Houston is… Entrepreneurial

    Exploring the factors influencing Houston’s famed entrepreneurial spirit 

    Houston’s business culture is unique — both distinctly global and local, it owes its evolution as much to every hardworking Houstonian as it does to the frontier mentality from which its industry grew. Entrepreneurship is an essential part of what it means to live in Houston, and whether you’re buying new business software or a cup of coffee, Houston small businesses and the entrepreneurs who run them likely play a role in your purchase. 

    Industry is in our history

    Houston owes its existence to brothers John Kirby and Augustus Chapman Allen, two entrepreneurs who saw opportunity in the unrest following the bloody Battle of San Jacinto. They bought their initial spit of 6,600 acres for just $10,000, successfully lobbied the Texas Congress for capital status, and put some ads in the paper claiming glory for Sam Houston and the Republic — all with about a dozen citizens sitting on a muddy bayou in land that wasn’t considered particularly desirable.

    First, they built a railway (that would go on to join the Union Pacific Railroad) and advertised the city as the place “where 17 railroads meet the sea,” despite the fifty miles in between Houston and the Gulf of Mexico. Once the railroad was underway, the city spent the next 50+ years bringing the sea to its borders, dredging Buffalo Bayou and Galveston Bay incrementally to accommodate larger and larger ships.1 They eventually turned that muddy stream into the second largest port in the United States, beginning the project before oil was ever even found in the state.

    Oil did, however, change everything. It made Houston the unofficial capital of the energy industry, combining the maverick spirit of its founders with the industry boom of many in the country chasing down the valuable resource, and contributing significantly to the growth of our region. 

    Houston’s origins tell a story not just of the quality of the human spirit, but of the inherent balance and imbalance of economic opportunity. To continue improving our great city through years of its exponential industrial and population growth, it is necessary to look unceasingly into how our entrepreneurial nature can better serve every single Houstonian.

    In Houston, small business is big

    Houston is certainly a huge, global city, but it just wouldn’t be the same without Mom and Pop.

    Houston is famous for its maverick founders, its tycoons, for the big business and even bigger briskets — but the reality is that business in Houston isn’t always so “big.” 

    Small businesses employed about 14% of our region’s workforce in 2019 — nearly 400,000 people. In addition, 81% of entrepreneurial firms in the Houston Metropolitan Area have fewer than 20 employees. According to estimates from the Greater Houston Partnership, the Metropolitan Area had 663,800 “non-employee businesses” in 2018; these are most often consultants or freelancers — the entrepreneurial spirit exemplified.

    What is the main business in Houston, Texas for small business owners? While real estate is Houston’s number one industry for small businesses, with 95% of firms employing fewer than 20 , industries like retail and administrative services are right on their heels, and smaller companies exist in all sectors (even energy!). These small businesses benefit Houston’s economy in important ways. In particular, creation of small businesses  among communities of color — sometimes a necessity to overcome employment barriers, challenges in building personal wealth, and discrimination — can help increase economic opportunity..

    Continued intentional support of Houston small businesses, especially among communities that disproportionately face challenges like lack of credit access, social capital and accumulation of generational wealth, is what the path toward a healthier and more vibrant local economy looks like.

    81% of Houston-area firms have fewer than 20 employees.

    Source: U.S. Census Bureau, 2020 Annual Business Survey, data year 2019 

    Diversity and disparities in Houston small business

    As well as its reputation for entrepreneurship, Houston is also a city known for its diverse population. Its cultural diversity today mirrors what demographers predict the U.S. population will look like in half a century. Houston’s reputation for entrepreneurship is inextricably linked to the city’s diversity. The growing populations in Houston from diverse backgrounds, namely immigrants and people of color, are not only the economic and cultural driving force for the evolution of our city, but also the future of our country.

    Houston ranks fourth in the nation for start-ups owned by Black, Indigenous, and other people of color (BIPOC), with 35% of start-ups in the Houston Metropolitan Area being BIPOC-owned. While 35% is high enough to outpace most major metros in the United States, it obviously falls short of true representation; the BIPOC population share of Houston Metro is far greater, at about 65%, according to 2020 Census data. Black and female residents remain particularly underrepresented in the small business community, with only 25% of small businesses in the Houston area being solely woman-owned, and only 3% being Black-owned, according to the 2020 Annual Business Survey.

    These trends underline the fact that simply being diverse is not enough, and that disparity will edge out prosperity if not given the proper attention and resources.

    Continue reading about income inequality and diversity in Houston

    Only 35% of new Houston businesses are BIPOC-owned

    By contrast, these residents represent 65% of our region’s population.

    Source: U.S. Census Bureau, 2020 Annual Business Survey, data year 2019 

    A region filled with allies for Houston entrepreneurs

    So, is Houston a good city for business? What kind of resources do Houston entrepreneurs have aside from an industrious culture? Despite common perceptions, the entrepreneurial spirit is not solely an individual cause. Houston’s penchant for entrepreneurship is aided in great part by our philanthropic, academic and nonprofit communities, which work to cultivate and support aspiring business owners from all walks of life. 

    These are just a few of the organizations whose work empowers entrepreneurs throughout Greater Houston. 

    Houston Fund for Social Justice and Economic Equity 

    This new initiative led by Houston Mayor Sylvester Turner and some of Houston’s top community leaders is working to fund and drive strategic progress for Black-owned Houston businesses and nonprofits.

    Impact Hub Houston

    With their Black Marketing Initiative, Impact Hub Houston is raising funds and offering training programs to elevate and support Houston’s Black entrepreneurs as they recover from the effects of the COVID-19 pandemic.

    The Prison Entrepreneurship Program

    The beauty of entrepreneurship is that its benefits are open to all — even those currently behind bars. The people at the Prison Entrepreneurship Program work directly with those currently incarcerated to foster and encourage their entrepreneurial spirits, so that they might find and create new opportunities for themselves and their communities once released. 

    The Wolff Center For Entrepreneurship

    The Wolff Center for Entrepreneurship at UH’s Bauer College of Business has been ranked the number one or two entrepreneurship program in the country, including a number one ranking in 2021 for the third consecutive year. Over the past decade, more than 1,400 businesses have been started by Wolff Center students, earning a collective $399 million in funding.

    Entrepreneurship matters to Houston

    Ensuring that Houston-area entrepreneurs have access to the tools and resources they need in order to thrive is vital to the continued success of our region. By understanding the challenges and barriers current and aspiring entrepreneurs face in Greater Houston, we can better equip our region with the tools it needs to foster an even healthier small business community that positively impacts us all.

    As important as they are to our region’s health and prosperity, Houston’s entrepreneurs are also a reflection of other truths about life in our city. Be sure to follow along on social media and in our newsletter to keep up with the “Houston Is …” series all year long.

    Helpful Articles by Understanding Houston:

    References:

    1Understanding Houston utilizes the U.S. Census term, “Hispanic,” “Latino” or “Hispanic/Latino” when referring to the overall population. For the purposes of this article, we will use these terms interchangeably depending on the nomenclature used in our cited sources.

  • The Great She-cession: How COVID-19 is impacting women in the workforce

    The Great She-cession: How COVID-19 is impacting women in the workforce

    America is facing an unprecedented exodus of women from the workforce. The hard-fought gains women have made over the past 40 years are at risk of being wiped out by the economic crisis caused by the COVID-19 pandemic. As of March 2021, more than 1.8 million women have left the workforce since the pandemic started. While this number is an improvement over the initial 4.2 million women who dropped out of the job market last April, so many women have left the labor force that the current participation rate has fallen to 56.1%, a level not seen since the late 1980s. 

    Compared to men, women initially left the workforce in disproportionately higher numbers and their return to the job market has been slower. The graph below shows that using February 2020 as a baseline for both sexes, women have lagged men in their ability to regain their pre-pandemic employment levels. This disproportionate collapse in women’s labor participation has led some to call this the first “she-session.”

    Like everything related to COVID-19, the effects of the pandemic on working women varied among different groups. On average, women of color experienced greater hardships than all other workers, including white women. Comparing the experiences of Black, Hispanic and white women, Hispanic women had the highest unemployment rate — 20.1% — in April 2020, at the peak of the crisis. However, since then, Black women have found their recovery to be slower than the other groups.

    20.1% unemployment
    At the peak of the pandemic in April 2020, Hispanic women had the highest unemployment rate in the nation.

    Working mothers of young children also have been hit especially hard. As daycares closed and school became virtual, mothers found themselves taking on an even greater share of domestic responsibilities. According to a McKinsey report, 23% of working women with kids under the age of 10 have considered leaving the workforce altogether.

    While there is some evidence that women are beginning to find their way back into the labor force, it is important to realize that, like many other disparities the COVID-19 pandemic has highlighted in our society, it didn’t create this problem. It simply magnified it. The truth is that growth in women’s labor force participation has stalled since the early 2000s. It began to decline after the Great Recession, mimicking trends in men’s participation rate. Interestingly, this phenomenon isn’t replicated in other advanced economies around the world. The proportion of women in the U.S. labor force has declined since 2000 — the only country among five major OECD countries with that trend.

    “23% of working women with kids under the age of 10 have considered leaving the workforce altogether.”

    Societal expectations

    Even before COVID-19, women performed an unequal share of the domestic responsibilities in opposite-sex-headed households, even as the amount of time men spend on housework has increased over the last 50 years. In 2018, 9.6 million females gave family and home responsibilities as their reason for not participating in the labor force, compared to just 1 million men. This is hardly surprising. When families start looking at the high costs of child care and the lower wages of women, it seems to make the most economic sense. But these individual “forgone” conclusions are predicated on structural failures.

    The gender pay gap

    Equal Pay Day for 2021 was March 24. This date symbolizes how much longer a woman would need to work to earn the same amount the average man did in 2020 alone. Meaning, because women earn less, on average, than men, they must work an additional 82 days to earn as much as an average man did in one year. For Black women, that symbolic day would be in August, and not until October for Hispanic women. We see these disparities at both the national and local levels. In 2017, women in Montgomery County made $20,000 less than men and women in Fort Bend County made $15,000 less. Harris County had a smaller but still significant gender pay gap of $7,500.

    According to a study by the National Women’s Law Center, a woman starting her career today stands to lose $406,280 over a 40-year period compared to her male counterpart. This earning gap spans all jobs, no matter what career a woman choses. The same study found the gender wage gap in 98% of occupations. As Megan Rapinoe, the U.S. Women’s Soccer star, said in her testimony on Capitol Hill: “One cannot simply outperform inequality.” It is a truly pervasive problem, but it is hardly a new one. In fact, in 25 years, the gender pay gap has only shrunk 8 cents. At this rate, we can hope to close the gap by 2059. While this isn’t a problem exclusive to the U.S., other countries have made much better progress toward ending it.

    Besides being paid less for the same work, women are also overrepresented in jobs with lower wages. While there are many underlying causes for this, one of the largest contributors is discrimination. According to a report from the Washington Center for Equitable Growth, occupations with more men tend to pay better regardless of skill or education level. These trends are especially more pronounced for women of color. The implication for this being that even working full time, these women face higher rates of poverty. The negative effects extend beyond women and hurt the next generation. According to a study from the Pew Research Center, single mothers are almost twice as likely as single fathers to be living below the poverty line.

    “a woman starting her career today stands to lose $406,280 over a 40-year period compared to her male counterpart”

    Structural obstacles to increasing women’s workforce participation

    COVID-19 has shown that, for all the advancements women have made in the workforce, the main impediment to gender equality is the structural barriers they face. COVID-19 further loosened the tenuous grip that kept many women in the workforce. 

    We have seen minimal gains in equal pay for equal work in the past quarter-century. The pay gap is a fundamental problem women faced before the pandemic, one they’ll continue to face throughout its duration, and even when it’s over. Research suggests that one of the most effective ways to close the pay gap is to help women achieve entry into the higher-paying, male-dominated fields, as women have an outsized representation in lower-paying jobs.

    Another roadblock for many women is lack of maternity leave. Research finds that mothers offered paid maternity leave were more likely to return to work after the birth of a child both in the short- and long-term. The study found a 20 percent reduction in the number of women who left their jobs in the first year after giving birth and up to a 50 percent reduction after five years. In addition to helping women stay in the workforce, evidence suggests that paid family leave provides myriad benefits to the child, which can have a positive influence on their future. 

    Oftentimes for women, the problem of finding affordable child care becomes almost insurmountable. In Texas, child care often costs more than college tuition, and parents don’t have 18 years to save for it. Even before the pandemic, child care in Texas was facing a tipping point. It is estimated that U.S. businesses lose roughly $4.4 billion a year because of lost productivity due gaps in child care. 

    Change, while not cheap, is necessary. Significant investments that support families will help all women, mothers, fathers, and children live up to their fullest potential and thrive by improving educational outcomes, time for family bonding, and allow both women and parents to “show up” fully in their professional lives.

    “In Texas, child care costs more than college tuition, and parents don’t have 18 years to save for it.”

    Women are integral to our collective prosperity

    Our ability to recover from the current economic crisis depends on women re-entering the workforce. Our ability to find new levels of economic growth depends on women being able to find economic success equal to men. A study often cited by Treasury Secretary Janet Yellen estimates that “increasing the female participation rate to that of men would raise our gross domestic product by five percent.” McKinsey estimates that gender parity would add 19% to GDP by 2025. If we don’t want the economic fallout of COVID-19 to become permanent, we must support women and encourage their return to the workforce. Our collective prosperity depends on it.

  • COVID-19 Recovery and the Ongoing Challenges Facing Houston Entrepreneurs

    COVID-19 Recovery and the Ongoing Challenges Facing Houston Entrepreneurs

    The ongoing COVID-19 pandemic has impacted Houston’s business community so drastically that no company is too big — or too small — to feel its effects. Even the healthiest businesses have found themselves in need of emergency assistance to stave off layoffs or permanent closure as a result of plummeting levels of consumer spending, stay-home orders, and fear of catching and spreading the virus to loved ones. And while programs like the Small Business Administration’s (SBA) Paycheck Protection Program (PPP) have provided valuable assistance to a number of employers, many of Houston’s small business entrepreneurs who most need these funds to survive have been unable to access them — particularly female entrepreneurs and entrepreneurs of color.

    The state of minority and female-owned small businesses in Houston 

    Houston is nationally recognized for its racial/ethnic diversity as people of color make up two-thirds of residents living in Houston’s three most populous counties. This reputation carries over to our small business community. According to a national analysis, Houston ranks first in the United States for minority entrepreneurs, based on criteria such as startup density, rate of new entrepreneurs, percentage of companies owned by minorities, and access to financial resources.


    Despite Houston ranking first in the U.S. for minority entrepreneurs, business owners of color are still underrepresented in the Houston area and face unique challenges.

    About 38% of Houston’s small businesses are minority-owned, higher than the rate for the state. In Fort Bend County, 53% of small businesses are minority-owned.  Woman-owned businesses are underrepresented in our regional economy —  just 29% of small businesses in Houston are women-owned.

    These businesses reflect the entrepreneurial spirit of Houstonians — forging their own economic path with talent and persistence — sometimes as a necessity to overcome employment barriers, challenges in building personal wealth, and discrimination.

    The importance of small businesses and Paycheck Protection Program loans 

    Both in Houston and across the nation, small businesses are vital to the financial and economic health of our communities. About 63% (68,500) of firms in the Houston Metro area are small businesses with fewer than 10 employees, according to the 2018 Annual Business Survey from the Census Bureau. Across the three-county region, 559,000 establishments with no paid employees (representing self-employed entrepreneurs) — generated $28 billion in receipts in 2017, according to the Census Bureau’s Nonemployer Statistics. 

    As a means of helping these businesses weather the economic storm accompanying the COVID-19 pandemic, the federal Paycheck Protection Program (PPP) loan began to deploy $349 billion to provide “small businesses” with up to $10 million in forgivable loans as long as certain requirements are met. The program allowed all businesses — including nonprofits, veterans organizations, tribal businesses, sole proprietorships, self-employed individuals and independent contractors — with 500 or fewer employees to apply.1

    Issues with the Paycheck Protection Program loans

    While the broad eligibility criteria allowed many small businesses to apply for relief, the exceedingly fast process and unclear guidance for borrowers and lenders had a narrowing effect, as businesses with significant capacity and legal/financial expertise were best positioned to apply. Furthermore, the 7(a) loan was quickly administered by banks that were existing SBA-certified lenders, a pool of lenders that has been criticized as having an insufficient track record of providing access to capital to underserved businesses owned by women and people of color.

    In less than 14 days, all PPP funds were exhausted due to high demand, with more than 1.6 million loans processed by about 5,000 lenders.2 It’s estimated that as of April 17, approximately 80% of small businesses that applied for a loan were still waiting for answers the day after the program ran out of funds.  

    Why minority- and woman-owned businesses in Houston are struggling

    Even before COVID-19, many Houston-area small businesses, microbusinesses, and sole proprietorships led by historically marginalized communities and women faced financial challenges at disproportionate levels relative to White small business owners in our region. On average, minority-owned businesses in Houston are denied loans at three times the rate of non-minority-owned firms. The COVID-19 pandemic has only exacerbated these challenges in Houston. Many small businesses owned by minorities historically have lacked access to established accounting infrastructure and banking relationships that would allow them to access substantive capital such as the federal PPP loan. 

    Some issues that prevent small businesses from accessing capital through PPP loans include: 

    • Low employee count: The financial incentives associated with PPP loans encouraged lenders to serve clients with larger loan sizes, meaning larger “small businesses” were more likely to have their requests approved than those with fewer employees. For context, 90% of businesses owned by a woman or minority in Metro Houston have fewer than 100 employees, according to the Annual Survey of Entrepreneurs. In response, some large banks have donated their fees totalling millions of dollars to nonprofit organizations. 
    • Smaller operations: Given that microbusinesses, sole proprietors, and contractors often have very low fixed costs (e.g., payroll, rent, utilities), the PPP loan rules and forgiveness conditions often do not truly apply to many small/micro minority- and/or woman-owned businesses as they are more likely than other groups to not have employees and significant overhead costs.

    Major local efforts in Houston to support small businesses have faced challenges, despite good intentions. For example, a $10 million loan fund in Harris County was depleted in less than 48 hours, with broad eligibility criteria and credit requirements that made it difficult for small/microbusinesses led by people of color to access these funds.

    Understanding Houston’s needs on the long road to recovery

    Small businesses are critical to our region’s economic success. When small/micro-business owners and self-employed entrepreneurs are unable to provide for themselves, their employees and their families, entire communities suffer. And when the safety nets in place are unable to accommodate the needs of the most vulnerable small business owners, the economic inequalities affecting our region will only intensify.

    As our region continues to work toward a long recovery process, thoughtful and direct action on behalf of minority- and woman-owned businesses will be needed to help these valuable institutions survive. Access to the right information is vital to making these important decisions. As we research and work toward a plan for our region, we invite you to explore the data, get involved and use Understanding Houston to learn more about what matters in our communities. 

    End Notes:

    1 Businesses in certain industries can have more than 500 employees if they meet applicable SBA employee-based size standards for those industries.
    2 “The SBA has processed more than 14 years’ worth of loans in less than 14 days,” said U.S. Treasury Secretary Steven T. Mnuchin and SBA Administrator Jovita Carranza in a joint statement.

  • Petroleum engineering professional, temporarily unemployed

    Petroleum engineering professional, temporarily unemployed

    Paula Inman: Lifelong Learner — Job Hunter — Energy Professional

    As a Texas A&M graduate in petroleum engineering, oil and gas was the foundation on which Paula Inman built her career. With more than two decades in the industry, Inman has seen the ups and downs of the oil and gas industry reflected in her own professional path. Her most recent down started after she was laid off by BP in August 2015, then laid off again by Hart Crowser in November 2016. After being laid off twice in 15 months, Inman entered her job search a bit weary, but still determined.

    Inman focused her search in the oil and gas field, but also expanded out to other engineering-driven industries in an attempt to expand her possibilities. But nearly two years into her search, she was scammed by an overseas opportunity that nearly drained her severance from BP. “I was begging. I was in the dumps. I was like, ‘Okay, God, what do you want me to do and how am I supposed to overcome this and continue to look for a job?’” Inman said. 

    Despite the scam, Inman pressed on and was referred to WorkFaith Connection through a friend volunteering with the Christian-centered organization. The mission of the organization is to encourage, educate, and equip disadvantaged job seekers with the skills and connections they need in order to gain employment. 

    “I was distraught, but luckily they got me in and I was able to do an orientation class,” Inman said. “I thought, ‘I have a resume already, this shouldn’t be a problem.’ But I went in with the attitude, ‘Okay, I’ve got to take whatever I can from this organization.’” 

    With resume building, practicing interviews, and professional coaching throughout the process, Inman feels she was able to receive the support she needed following the hurt she felt from the scam. Over a four-month period with the organization, Inman applied to “hundreds of jobs” and had five interviews that went on to second interviews, but none stuck, until she was able to find her current job as an engineering advisor with Occidental Petroleum Corporation, an international oil and gas exploration and production company headquartered in Houston.

    “I found out I got the job through a voicemail. I was like, ‘Oh my God!’ It was total elation,” Inman said. “The excitement of, ‘Oh my God, I’m not a loser anymore.’ But throughout that whole process, WorkFaith never stopped praying for me and supporting me.” 

    Even with strong experience in a healthy job market, people like Inman can still find themselves facing extended periods of unemployment in our region. Visit the links below to learn more about unemployment in the Houston area.

    Additional resources: