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The Racial Gap In Entrepreneurship Is Costing The U.S. Economy Billions

Source | FastCompany : By Lydia Dishman

Minority businesses could boost the economy by as much as $300 billion.

How? A new study from the Center for Global Policy Solutions titled, “The Color of Entrepreneurship: Why the Racial Gap Among Firms Costs the U.S. Billions,” analyzed business owners by race from 2007-2012 and found that firms owned by people of color have contributed to the economic recovery. The research was based on the U.S. Census Bureau’s Survey of Business Owners (SBO), which comes out every five years.

During that five-year period, non-white business owners added more than 72.3% of the jobs created by privately held companies. Nearly all entrepreneur-of-color groups experienced significant growth in the number of their firms, with Asian-American women-owned businesses taking the lead at 37.6% growth.

That’s just a fraction of the potential, according to the report. Discrimination, both past and present, is inhibiting the true growth of these businesses. Without that, an additional 1.1 million businesses could be established and could produce an estimated 9 million more jobs. This would increase the nation’s income by the aforementioned $300 billion.

The report also analyzed the differences between firms with employees and those operated by sole proprietors. This is important because annual sales and job creation have a major economic impact.

 

For example, on the growth side, the strongest annual sales were posted by firms owned by Hispanic men, increasing 7.2% to $1.6 million in five years. The boost came thanks to industry concentrations in wholesale and retail. Overall, firms owned by men had higher than average annual sales that translated to higher than average pay for employees at these businesses.

According to the data, 67.3% of firms without employees had annual sales of less than $25,000. Not only does that make it likely that the profits were only a fraction of the sales, but also that they weren’t able to keep their owners and the owners’ families out of poverty.

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