Business Ownership Can Help Narrow America’s Racial Wealth Gap: New Report
(3BL Media/Justmeans) â Racial gaps in education, employment and wealth reflect the disproportionate representation of black and Latino families at the bottom of the income scale in America.Â Black children are more likely to be born into poverty than white children, and are also less likely to escape. More than half of black adults raised at the bottom of the income scale remain there as adults, compared to a third of whites.
Now, a new funderâs brief released by the Asset Funders Network believes micro-and-small-business development strategies can help tackle this growing racial wealth gap in the U.S. Written by Joyce Klein of FIELD at the Aspen Institute with support from Capital One, this report entitled,Â Narrowing the Racial Wealth Gap through Business Ownership, says the lower levels of business and financial assets held by African-American and Latino households are one of the key reasons for the racial wealth disparity, suggesting that business ownership may be an important means to narrow the gap. It examines available research on business ownership, and the connection between business ownership and wealth creation for diverse populations. The brief also identifies proven tools and strategies investors can employ to strengthen access to and effectiveness of business ownership as a means to build wealth for Blacks and Latinos.
Data in the report indicates that in 2013, the net worth of Latino families was about one-tenth that of white, non-Latino families; the net worth of African-Americans was even lower.Â One of the reasons for the gap in household wealth was that African-American and Latino families have lower rates of investment in financial and business assets. Business ownership is an important means to build wealth in the U.S. economy. Â Yet, lower rates of business growth and survival among Latino-owned and African-America-owned firms remain a challenge in terms of wealth creation. The paper identifies three core causes for lower growth and a lack of success amongst African-American and Latino-owned businesses: financing, lower levels of education and business experience, and lack of market access.
Microenterprise is a proven yet under-used strategy for increasing household wealth. However, it is now seen as more relevant in order to bridge the growing racial wealth gap and to promote financial well-being. Microenterprise Development Programs (MDOs) have traditionally focused on serving non-white clients and addressed issues that have been identified as contributing to the lower growth and success rates of African-American and Latino-owned firms. They have focused on helping entrepreneurs to secure financing, strengthen their business knowledge and skills, and access markets. Research by FIELD found that the outcomes for non-white individuals working who received assistance from MDOs had a 95 percent business survival rate; workers were paid a median hourly wage of $15.16 and business revenues increased by over $12,000!
The American dream has always been for every individual to have a fair chance of success, so it may be that by supporting more micro-and-small-business development strategies for these communities this racial wealth divide will narrow, allowing the American dream to become a reality for all.Â
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