Economists didn’t talk about a K-shaped recovery until 2020. After previous recessions, where the economy would “dip,” we could expect a united recovery for a significant portion of Americans — sometimes this manifested in a “U-shape,” a “V-shape,” or even in a “W-shape” in the case of a second “dip.”

Today, after decades of exercising economic dogmas like shareholder primacy and prioritizing economic growth over inclusion, economists have realized: We’ve created two distinct economic realities. Otherwise put, despite a significant rise in GDP this past quarter, tens of millions of Americans are still suffering from the economic impacts of the pandemic.

Let’s sit with that for a moment. While economists used to be able to responsibly describe a united economic trajectory upwards or downwards, we’ve now created a distinct subsection of our economy that is so large — and their experience so tragic — that economists had to identify a new shape to describe our economic situation. The bottom right quadrant of the letter “K” represents the continued trajectory downwards for millions of Americans, towards more severe economic dislocation.

And, at this point, it should be no surprise that this “subsection” is disproportionately composed of women and people of color. Recent research from the St. Louis Fed found that Black millennials continue to fall further and further behind — not just compared with white counterparts, but compared with previous generations of Black Americans. Black millennials trail previous generations of Black Americans in net worth by 52%.

While the American Rescue Plan was the first necessary step towards mitigating the severity of the continued economic downturn for so many millions of Americans, we clearly must do more. The American Jobs Plan, Biden’s infrastructure plan, outlines a path forward.

At Common Future, we were thrilled to see the Jobs Plan prioritizing wealth-building infrastructure in some of our most marginalized communities, including significant support for care workers and plans to develop or support community-based small businesses incubators and innovation hubs. These are precisely the types of solutions that will provide the scaffolding for those who have been left behind to build new opportunities for themselves and their families. As Rodney Foxworth put it in Inc., we must “support the support system.”

Still, we know that the success of the American Jobs Plan hinges on its ability to invest this capital effectively, reaching those communities who have been historically marginalized. Organizational scientists like Marissa King have, through extensive research, found that people in positions of power are more likely to rely on stereotypes and biases when making decisions. However, the most effective and creative leaders are those who can broker new relationships — reaching out to new networks of thinkers who are approaching change differently. Every good program designer knows that more diverse teams lead to better outcomes.

Following the announcement of the Jobs Plan, we asked our network of nonprofit entrepreneurial support organizations (ESOs), community development financial institutions (CDFIs), small business incubators, microlenders, and community investment funds: How can this plan be helpful to the communities you serve? Here’s where we found consensus. Reach out to us if you’d like to see our full list of recommendations:

On supporting intermediaries

1. Only after engaging community-based and BIPOC-led organizations have PPP dollars actually reached target communities. Organizations that support our most marginalized businesses and communities must be prioritized first when dispersing funds to business incubator hubs. Without this prioritization, we risk achieving the same outcomes as the first round of PPP funding.
2. We cannot underestimate the growth and impact potential of equity-focused local lenders. Groups like Local First AZ have become staples of local economies — they are setting new standards around risk evaluation and developing innovative best practices around loan repayment. Funding to these organizations should be significant, flexible, and year-over-year.
3. Consider funding the coordination of services—capacity investments into intermediaries allow these groups to: (1) play a coordinating role in supporting potential business owners gain access to the right type of capital and support, (2) develop sectoral value chains with the small businesses that they serve (e.g. Industrial Commons) and (3) track the success and failures of programs and capital products designed for small businesses, building on a rapidly growing, shared body of knowledge around “best practices.”

On channeling capital the right way

1. Modernize the SBA in addition to increasing capital for the 7(a) program. The SBA has named revenue-based financing (RBF) as a promising tool for almost a decade. Provide multiple options for alternative repayment structures, including RBF and other innovative repayment structures like those at Mission Driven Finance. Get rid of the personal guarantee by subsidizing a risk fund.
2. Our body of knowledge around alternative data and lending strategies has grown massively in recent years. Listen to this new data and support the capacity of lenders, including CDFIs, who are developing new indicators to assess the potential “risk” of a lendee.
3. Incentivize mainstream lenders to lend to small, non-traditional businesses by providing loan guarantees for those businesses who have been vetted by trusted intermediaries. BIPOC-led businesses should be prioritized. Once these relationships are established, they might endure. CDFIs, ESOs, and other “hubs” will be invaluable partners in identifying promising, non-traditional businesses.

On childcare and quality jobs

1. It’s critical that in-home childcare facilities are eligible for “upgrade” funds — running an in-home childcare business is a path to business ownership for a lot of women of color who wouldn’t have the capital to take on an off-site facility. Small childcare facilities should be prioritized as well — these businesses could serve multiple employers and provide a pathway to ownership and wealth creation for women-owners.
2. We must support Quality Jobs and Worker Voice when investing in critical sectors of our economy. Bad jobs do not serve individuals, families, or the economy overall. We must move past “employment rate” as an indicator of economic health.
3. Black and Brown businesses are disproportionately sole proprietors. We also know that when a business is owned by a Black or Brown leader, the business is far more likely to hire Black and Brown employees. We support recommendations by Brookings around increasing support for sole proprietorship conversion into employer-firms.

A note on getting coordinated

All of these recommendations will go farther once there is more coordinated agreement on how community investment will lead to a more healthy economic system. We strongly support the push for a White House Initiative on Inclusive Economic Growth under the National Economic Council (NEC) that would serve this role.

The Jobs Plan offers an incredible opportunity for marginalized communities to gain access to new resources that will allow them to build new wealth for themselves, their families, and their communities. Let’s make sure this capital actually works for our communities.