Question of the Week
The Key to Closing the Racial Wealth Gap
Happy Friday, all!
We had a historic week this week as Juneteenth became a federal holiday. Juneteenth (short for “June Nineteenth”) marks the day when federal troops arrived in Galveston, Texas, in 1865 to take control of the state and ensure that all enslaved people were freed. This arrival was two and half years after the signing of the Emancipation Proclamation. Juneteenth honors the end to slavery in the United States and is considered the longest-running African-American holiday.
While recognizing the holiday feels like a significant step in equality, we still have a long way to go to true freedom and equality. This week in my Forbes column, I wrote about the key to Closing the Racial Wealth Gap: Black entrepreneurship. I hope you find it insightful and helpful!
This year marks the 100th anniversary of the Tulsa Race Massacres. Over two days, a white mob in the city’s Black district of Greenwood killed an estimated 300 Black Americans and left nearly 10,000 destitute and homeless. The Greenwood area was known as Black Wall Street, an epicenter of Black business and culture.
According to Hannibal Johnson, author of Black Wall Street: From Riot to Renaissance in Tulsa’s Historic Greenwood District, the area was built “For Black people, by Black People.” Before racist riots destroyed the prosperity of Black Wall Street, Greenwood’s thriving Black economy demonstrated the power of entrepreneurship in creating wealth for entrepreneurs and the community around them.
We’re still contending with a racial wealth gap created through centuries of racism and discrimination, but black entrepreneurship may be the way we can help close the gap.
Why entrepreneurship is the key
The racial wealth gap is a chasm. According to the Survey of Consumer Finances, in 2019 (the most recent survey conducted), the median net worth of Black households was $24,000 as opposed to $189,000 for white families. This shortfall in financial wealth creates a cascade of inequalities in education, homeownership, and simply saving for emergencies. And while it will take multiple solutions to solve these enormous problems, entrepreneurship can provide the best opportunity to build sustainable, long-term wealth.
Why? A Congressional Black Caucus Foundation (CBCF) study found that the median net worth for Black business owners was 12 times higher than for Black non-business owners. In addition, while whites have 13 times the wealth of Black Americans, when comparing the median wealth of Black and white business owners, the median wealth gap decreases to three times. While three to one is still significant, it’s not as daunting as 13 to one.
Owning a business is good for Black entrepreneurs, but it also helps the communities around them. According to the study, Black-owned companies have created over 1 million jobs and generated over $165 billion in revenue.
Although these statistics provide some hope, Black entrepreneurs still face substantial hurdles in succeeding in business. Black entrepreneurs are more likely than those of any other race to fund their business with personal credit cards, while white entrepreneurs rely most on business loans. Additionally, black business owners are nearly three times as likely to say the lack of capital hurt their profits.
We saw this play out in real-time during the Covid Pandemic when black-owned businesses declined more than 40%, significantly more than any other ethnic group. Black-owned companies also had more trouble getting access to government relief. This hurdle is on top of all the other obstacles Black entrepreneurs face. Blacks make up only 3.5% of America’s business owners, though they account for 13% of the U.S. population. In contrast, whites make up 60% of the U.S. population but own 81% of its businesses.
Quote of the Week
“Juneteenth has never been a celebration of victory or an acceptance of the way things are. It’s a celebration of progress. It’s an affirmation that despite the most painful parts of our history, change is possible—and there is still so much work to do.” – Barack Obama
Task of the Week
I hope you enjoy the newest holiday weekend. I also urge you to read more about its significance. Here’s an excellent summary from Pockets Change on Instagram. Lastly, think about one action you can take today to help the fight true equality and freedom. I’d love to hear what you come up with. You can contact me at the links below.