Bridging The Racial Wealth Gap
The racial wealth gap in the US is a burden on minorities and the overall economy. Despite overall wealth increasing in median US families over the last 20 years, the disparity between minority families and white families has become even more prevalent.
The states that are home to 65% of Black residents in the US fall below the national average in a range of categories, from economic opportunity to public health, to healthcare quality to employment.
This widening racial gap creates many disadvantages for minorities and Black individuals, families, and communities. This limits the economic power and prospects of minorities. The worst of all is that these effects are cyclical.
Whether it’s the lack of access to capital or more systematic issues, there are many factors to unpack. Outside of the clear negative effects for minorities, the US economy is impacted by the racial wealth gap.
This article will look at some challenges minority owners face, the impact of closing the wealth gap, why to support minority businesses, and more.
Challenges for Minority Business Owners
Minority owners may only make up around 20% of small businesses in the United States, but we bring diversity to a very undiversified market. Covid-19 and widespread, systematic injustice created a challenging landscape for small business owners in 2020, especially if you are a minority business owner.
The pandemic's impact has been felt worldwide and has changed how pretty much every business operates, from buying masks, implementing social distancing, or altering business channels entirely.
These new expenses impact your profits, especially as a small business. Despite this, business owners mostly avoid charging their customers more in fear of losing more customers.
Impact on The Economy
Self-employment can help improve a family’s earnings, diversify its wealth base to nonpersonal assets, and patch shortfalls. However, the real issue is access to capital, which is significantly more difficult for minorities.
Minorities are less likely to be granted small business loans, and these loans are vital for economic development, but the definitions are fairly vague and broad.
The widening of the wealth gap disadvantages minorities and their financial prospects, but it also weakens the entire US economy. Fewer minority dollars to invest in the economy leads to a lower ability to increase wages, create jobs, and improve homes' value.
Another issue impacting the economy is that most places are going cashless, with the need for card payments skyrocketing in traditionally cash-heavy businesses. That is creating new issues that weren’t prevalent before. So, if you need to collect payment from your customers, it will be of the utmost importance to rely on payment services that can integrate well with email marketing services, track the status of invoices, and ensure that you do not run into any issues.
There is a common misconception that there’s only so much wealth to go around, so helping other communities and minorities will lessen someone else’s wealth. This ‘us vs. them’ mentality needs to be a thing of the past; it’s inaccurate and damaging.
Small businesses in the US coming second only to homeownership as the best source of wealth building, but despite this, people of color are denied credit more frequently and are charged steeper rates.
In the wake of two crises this year, one medical and the other racial, it is more important than ever to help small businesses, especially those owned by POC, and help rebuild the US economy. Small businesses also employ over half our workforce and create over 60% of new jobs, and it is at a critical state because of wealth inequality across our nation.
Why Support Minority-Owned Businesses
We need entrepreneurs. We are a nation that has evolved to be a global superpower with Black and minority groups as our communities' backbones. We need to continue to push and keep the entrepreneurial spirit strong.
Immigrants are twice as likely to start businesses than US nationals, but they are often classed as second-class citizens in our broken system. So, supporting these minority business owners is vital to improving our economy.
Support can come at a consumer, a community, or even a government level. We can contribute different resources to the larger goal of supporting minority-owned businesses and encouraging more to grow and start.
The pandemic has created new challenges for minority business owners but has created more opportunities for starting an online business and thinking outside of the box. If it is your dream to sell your one-of-a-kind products online, then you will need a great eCommerce platform. You'll also need a reliable host to store that website, and you'll want to make use of the best eCommerce platform that you can afford.
As a customer, focusing purchasing power on minority-owned businesses can support local economies. You can do your part in shrinking the racial wealth gap by creating new jobs and helping larger organizations become more accountable for their lack of representation.
More companies can diversify their partnerships and hiring, while governments can implement entrepreneurial programs and schemes to encourage minorities to invest in themselves. This could be the launch of how we can close racial wealth gaps in our country.
The money you spend in the community often goes back into it, whereas money spent on multinationals fills someone's already overflowing bank account. Finding minority businesses to support is not a hard task and doesn’t require a massive change from the usual. A quick Google search can tell you where the local businesses you can support are.
Closing the Wealth Gap and the Future
Minorities in the US face a range of factors and variables that limit their wealth development. When these are left unchecked, the gaps could spiral even further out of control and have a detrimental impact on the US economy as a whole, not just on minorities.
Banks can take steps to reform policies such as mortgage interest tax deduction to benefit all income levels, not just the high-income families. Also, helping minority families enroll in automatic savings vehicles could also help improve wealth inequality and help promote the potential of saving for all US residents.
In terms of established banking relationships, there is a real disparity between minority-led firms and other businesses. This impacts access to capital and creates an issue from the ground up, so we need to support these businesses.
The cure isn’t a simple process, as some of these issues are systemic and deep-seated. However, acknowledging and understanding the problem is certainly a step in the right direction.
Only by understanding the issues can we start to target them and work on fixing them. After all, it is in the nation’s best interest as it could be valued at over a trillion dollars.
So, if you’re a minority owner, trust your gut, and always remember that you are your own boss. If you can navigate the unique challenges for business ownership, you will succeed and thrive.
Copyright © 2023 SCORE Association, SCORE.org
Funded, in part, through a Cooperative Agreement with the U.S. Small Business Administration. All opinions, and/or recommendations expressed herein are those of the author(s) and do not necessarily reflect the views of the SBA.