New CAP analysis finds that women and people of color are less likely than white men to own small businesses, and the report outlines recommendations for promoting entrepreneurship from these groups.
Washington, D.C. — Entrepreneurship has been on a long-term decline since the early 2000s, but in addition to the overall slump in American business dynamism, Hispanic, African American, and female-headed households in particular face even more difficulty in their ability to start a business, a new analysis from the Center for American Progress shows. The report, unveiled today at an event with U.S. Treasury Secretary Jack Lew, shows that African American households and Hispanic households have lower rates of business ownership than white households. Single women, additionally, have lower rates of business ownership compared with single men, and both have lower rates than married households.
“There are structural barriers that are holding back people of color and women from becoming entrepreneurs, beyond just differences in income and wealth that are correlated with business ownership, and this exacerbates economic inequality faced by these groups and holds back American business dynamism,” said Kate Bahn, Economist at CAP.
CAP’s report focuses on the challenges to entrepreneurship that people of color and women face and explores the role that lower levels of income and wealth play for people of color and women in their ability to start a business, as well as structural barriers, including a lack of access to informal entrepreneurial training and networks and more difficulty securing startup capital and business loans. The report also looks at broader economic factors, such as aggregate demand and competition, as well as gender inequity and other basic public policy challenges, which may also affect people of color and women more or differently.
An analysis using Panel Study of Income Dynamics data reveals that African Americans are 5 percent less likely to have a business in their household compared with white households—even at the same levels of income, wealth, and education—and Hispanic households are 6.7 percent less likely. Single women are 3.9 percent less likely to have a business compared with single men.
CAP’s report outlines recommendations to help break down the barriers that people face in starting their own businesses and help them become successful business owners. These recommendations are focused specifically on improving the entrepreneurship of women and people of color but are also applicable to the small-business economy as a whole. The recommendations include:
- Addressing the wealth gap and expanding access to capital through an enhanced State Small Business Credit Initiative
- Developing entrepreneurial apprenticeships
- Fostering early training and education to help young people foster an entrepreneurial spirit
- Tapping the resources of ‘one stop shops’ and Self-Employment Assistance Programs to help people start businesses
- Advancing broad progressive economic policies—such as those that strengthen demand, ensure a strong labor market, and promote a robust middle class—to expand opportunities for entrepreneurship. Many of these policies are outlined in the recent CAP report “Raising Wages and Rebuilding Wealth.”
Click here to read “A Progressive Agenda for Inclusive and Diverse Entrepreneurship” by Kate Bahn, Regina Willensky, and Annie McGrew.
Related resource: 1 Million Missing Entrepreneurs by Adam Hersh and Jennifer Erickson
For more information on this topic or to speak with an expert, contact Allison Preiss at [email protected] or 202.478.6331.