Finance and Assets

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

January 23, 2017  • Joyce Klein

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Our nation faces significant challenges addressing the growing racial wealth gap. This white paper, written by Joyce Klein, Director of FIELD at the Aspen Institute, outlines the role that business ownership can and does play in building wealth for people of color.

Latinos and African Americans holder relatively low levels of business assets, contributing to their lower levels of wealth overall. Yet there are trends in the right direction: rates of business creation among these entrepreneurs are increasing, and now exceed those of whites. Particularly among African Americans, higher levels of college attainment combined with expanded contracting opportunities are enabling movement into more lucrative markets and sectors.

While there are positive signs, low levels of personal wealth and challenges in accessing business credit continue to be primary factors limiting the growth of firms owned by Latinos and African Americans. Relatively high and growing levels of student debt further complicate the financial challenges faced by entrepreneurs of color. Lower levels of education among Latinos constrain their ability to move into higher-growth, higher-revenue sectors, and also affect the skills they bring to businesses they create.

The white paper outlines short- and long-term recommendations to address the racial wealth gap through business ownership strategies. In the short-term, continuing and expanding efforts to increase access to capital, skills, networks, and markets will be needed to realize the promise that business ownership holds for addressing the racial wealth gap. In the long-term, universal policies to narrow the racial wealth gap — such as those aimed at raising the quality of education, building savings, and increasing financial inclusion — will be critical.

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