SET-ASIDES, MINORITY BUSINESS.Minority business set-asides are affirmative action programs designed to assist minority business enterprises—firms that are at least 51 percent owned by well-defined minority group members—in obtaining contracts from government agencies or private organizations. Set-asides generally take one of two forms: (1) provisions that fixed percentages of the total number or total dollar value of contracts be allotted to minority-owned businesses or (2) requirements that recipients of prime contracts allot fixed percentages of the total amount awarded to minority-owned subcontractors and/or suppliers.
Arguments against minority business set-asides suggest they are inefficient and wasteful, concentrating most contracts on a few politically connected firms, often firms with little, if any, meaningful management or control by minority group members. Arguments in favor of minority business set-asides suggest that the abuses are isolated, whereas the assistance to minority firms is vital for their survival and growth. The most contentious argument relates to whether setasides actually assist minority communities or whether they enrich an elite few, including white owners. The balance of research, however, seems to suggest that minority-owned businesses generally create jobs for minority workers and that efforts to assist minority businesses in obtaining contracts with state, local, and government bodies often help to increase minority employment.
Research on specific government set-aside programs, nevertheless, reveals that there may be other less costly means of assisting minority businesses or increasing their share of contracts. These alternative strategies include subsidization of start-up capital, bonding and insurance waivers, and preferences for and outreach