JPMorgan Chase – The inequality of business equity
Data: U.S. Census Bureau, Annual Business Survey. (Hispanic respondents also identify with a racial group, so they are double counted.) Chart: Connor Rothschild/Axios
Only 18.3% of American businesses are minority-owned, according to the U.S. Census Bureau, despite minorities comprising 40.3% of the population.
Why it matters: Business ownership can create wealth, and wealth begets wealth in America.
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The inequality might be even more severe than the numbers suggest, given that they were compiled before the pandemic. Businesses owned by Black, Latino and Asian Americans were decimated in 2020.
The National Bureau of Economic Research estimates that the number of Black business owners decreased by 41% between February and April of 2020, while Latino business owners fell by 32% and Asian business owners declined by 26%. White business ownership was off by 17%.
One reason for the higher closure rate is that minority-owned small businesses tend to have smaller cash buffers than do white-owned small businesses, according to the JPMorgan Chase Institute. They often are much more likely to be sole proprietorships and to have been around a shorter period of time, according to the Small Business Administration.
And the New York Fed notes that many Black-owned businesses are concentrated in cities hit hard by the virus.
Historical factors that have contributed to the relative lack of minority-owned business include discriminatory bank lending practices, less inherited wealth, a homogeneous venture capital industry and distrust of white-controlled institutions.
The bottom line: America cannot seriously begin to close the income inequality gap until it begins to close the business equity gap.
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