Bridging the Divide: How Business Ownership Can Help Close the Racial Wealth Gap

Bridging the Divide: How Business Ownership Can Help Close the Racial Wealth Gap

Business ownership plays a significant role in wealth creation/accumulation and could help address the racial wealth gap in the U.S. while also creating jobs and stimulating the economy more broadly, a report from the Aspen Institute finds. Funded by the Annie E. Casey Foundation, the report, Bridging the Divide: How Business Ownership Can Help Close the Racial Wealth Gap (30 pages, PDF), found that African Americans and Latinos have lower business ownership rates and tend to own smaller businesses than white Americans, which contributes to their lower levels of household wealth. Factors behind the smaller size of African American- and Latino-owned firms include limited access to capital and the concentration of those businesses in the retail and service industries, due in part to discrimination; the relative newness of African American- and Latino-owned businesses; the higher share of founder-owners among African American- (81 percent) and Latino-owned (79 percent) firms compared with white-owned firms (70 percent); and motives for starting a business, with African-American and Latino entrepreneurs more likely than white entrepreneurs to cite flexible hours, work-life balance, or both as important reasons for starting a business. Recommendations for boosting entrepreneurship among African Americans and Latinos as a way to address the racial wealth gap include targeting efforts to improve access to properly structured credit for entrepreneurs of color; supporting programs that help minority entrepreneurs establish and build credit; and providing business development assistance for growth-oriented minority-owned firms.