The wealth gap has been written about at length between Blacks and whites, stemming back to the slavery era and the lack of money changing hands between generations. The results of inherited wealth, or lack thereof, often mean that Blacks are starting off with a greater struggle in competing in the marketplace, to say nothing of the current obstacles they face. As a result, many have wracked their brains trying to figure out a solution, but a recent report covered by Black Enterprise suggests that Black entrepreneurship may be the answer the community needs.
This report is The Tapestry of Black Business Ownership in America: Untapped Opportunities for Success, a report by the Association for Enterprise Opportunity. The Washington, D.C. nonprofit and its 450 members provide capital and services to help entrepreneurs start and expand their businesses, especially those traditionally underserved. The report combines data analytics and a survey of 300 business owners, 200 of those being Black. One figure found is that Black business owners have a median net worth 12 times higher than non-business owners.
“Self-employment can go a long way toward closing the racial wealth gap,” says AEO President and CEO Connie Evans. “White adults have 13 times the median wealth of blacks, whereas white business owners have three times the wealth of their black counterparts. That is a significant difference—one that would help create economic opportunities for all people.”
Part of the issue for the Black community is that many of these Black-owned firms don’t have parity with their counterparts. For example, 96% of Black-owned sole proprietorship firms have no employees versus 81% for all U.S. firms. Black-owned employer firms often have fewer workers than the national average as well, and if they were able to increase these operations and hire within their own communities, they could take a substantial chunk out of Black unemployment numbers.
With this said, the question becomes what’s stopping this from happening? Evans points out three main gaps that hamper the startup and growth of Black businesses, wealth, credit, and trust. “Persistent low wealth in black communities equals less access to personal or friends-and-family funding for startups. It means lower homeownership, fewer assets overall, and a lack of collateral to secure credit via loans. These wealth and credit gaps are exacerbated by a trust gap, fueled by discrimination and bias black Americans have faced. That can stop them from taking crucial actions to grow or maintain their business,” she says.
Part of the solution may be forgoing what she calls the “go it alone” mentality and using both their professional network and non-profits to support themselves. Other options may include choosing high-paying sectors like tech, healthcare, and construction.