Equality Is Not Enough: Reflections on the Paycheck Protection Program
Our society often designs and implements policies that prioritize equality, but prioritizing equity or justice would better address the disparities between racial groups.
In the midst of both a global pandemic—which is disproportionately affecting communities of color—and an international movement largely fueled by the tragic killing of George Floyd, discussions about race are front and center in a way that many have never experienced. Given the increasing frequency of these conversations, it feels like a good time to revisit a popular social media image.
You’ve probably seen some version of this picture before—three people trying to watch a sporting event using different combinations of boxes to illustrate the differences between equality, equity, and justice.
One of the key lessons to be learned from the picture is that despite being related, the terms should not be used interchangeably. Another lesson—probably the most important one we can learn from this—is that equality is not the optimal outcome. Even if equality were achieved (such as in the picture), it would not address the tremendous pre-existing disparities between racial groups. In order to overcome those gaps, we must push beyond equality and work toward achieving equity and justice.
Despite this seemingly straightforward concept, our society continues to design and implement policies that prioritize equality—or, rather, the appearance of equality. But we know the systems of structural racism in the United States have created a racial arrangement that is anything but equal. As a result, race-neutral interventions, which are grounded in the idea of equality, are more likely to produce inequitable outcomes and preserve the status quo.
One recent example of this is the Paycheck Protection Program (PPP). PPP provided loans to small businesses in an attempt to help keep people employed during the COVID-19 pandemic. And while all businesses were technically provided with “equal” opportunity to access the application, minority-owned businesses were overwhelmingly excluded from receiving loan funds, in part due to the fact that many did not have pre-existing relationships with many SBA-approved lenders.
This disadvantage was compounded by the fact that minority-owned businesses were already among the most “at risk” coming into the pandemic. And a Stanford University study found that within a short period of time, more than 40 percent of Black businesses closed permanently as a result of COVID-19.
The impact of low PPP participation by minority businesses may increase dramatically if a recent effort to convert a large percentage of PPP loans into grants is successful. Small businesses that received PPP loans under a certain threshold could essentially have their loans forgiven, a lifeline that would significantly increase their chances of surviving and thriving in the future. But the minority-owned businesses left out of the process will likely face an even wider gap between themselves and their white-owned counterparts (assuming the minority-owned businesses are able to survive the pandemic at all). As such, the PPP could join a long list of equality-focused programs and policies that ended up producing inequitable results.
So, what would it mean to prioritize equity and justice over equality? The most important component requires designing interventions to specifically address the existing gaps between minorities and whites. Doing so also requires intentionally advantaging minorities and other disadvantaged groups, such as in these examples in the Northeast and in Pittsburgh regions, to ensure PPP reaches smaller and minority-owned firms. The most direct example might be found in Asheville, North Carolina; its city council recently passed a resolution to provide reparations to its Black residents, in part by investing directly in Black businesses as a means of boosting economic mobility and creating generational wealth for its Black residents.
While the effectiveness of policy interventions such as reparations can (and continues to) be debated, there should be no question about the intent behind them: to address the impact of centuries of structural racism and achieve equity. The intent to address existing race-based disparities—something missing during the design and implementation of PPP—means the difference between working toward equality and working toward equity and justice for minority-owned businesses. Because of the legacy of structural racism in the United States, good intentions without action are not enough. If we truly want to create a more equitable society moving forward, it is essential that we incorporate those intentions when implementing new programs and policies.
The views expressed in this report are those of the author(s) and are not necessarily those of the Federal Reserve Bank of Cleveland or the Board of Governors of the Federal Reserve System.