Closing the racial wealth gap has become a critical imperative for change agents across the nation. And this is a good thing.
According to one study, it will take 228 years to close the gap between whites and blacks and 84 years to close the gap between whites and Latinos. So we need all the help we can get!
Amidst the steady cadence of virtual conferences, convenings, panels, roundtables, fireside chats, and the like, there are often a reliable set of solutions that are offered up as potential fixes for the problem.
“Get more Blacks and Latinos into homeownership,” they say.
“Close the pay gap.”
“Help people of color secure more life insurance to allow for generational wealth transfer.”
These are all fine, but none of them will make as much as a dent in the racial wealth gap.
For one, the gap continues to grow. According to inequality.org, Black household incomes halved between 1983 and 2016 while median white household incomes have risen by one-third. No amount of homeownership – particularly in an economy that devalues homes and communities occupied by Black people – will reverse this trend.
According to Barclays, there are two primary ways by which global wealth is created: inheritance and entrepreneurship. Because of the racial legacy in this country which has separated Black people from mechanisms of wealth creation, inheritance is off the table. Entrepreneurship is our one best shot.
Unfortunately, Black entrepreneurs go underleveraged, undervalued, and under-resourced. On average white-led companies generate 10X the revenue of Black-owned businesses. Yet and still, Black women are the fastest-growing segment of entrepreneurs in the nation. Bringing black businesses to par with white ones would produce an estimated 9 million more jobs and boost our national income by $290 billion. The potential is there, but Black entrepreneurs lack access to the key factors necessary for building a robust and viable business, including education, relationships, and financial capital.
Detractors of entrepreneurship as a primary driver for closing the racial wealth gap point to the fact that not everyone is interested in or well-suited to be an entrepreneur.
All facts.
However, no strategy has a more substantial ripple effect than entrepreneurship. Not only is it a means for securing generational wealth for the founder, but entrepreneurs of color are more likely to locate their businesses in communities of color which fosters community development. They are more likely to hire people of color, creating jobs that drive economic growth. And history has shown us that there is nothing more stabilizing to the African American predicament in this country than a burgeoning Black business community. By focusing on and investing in entrepreneurship, mainly through the lens of technology and innovation, Black people have a fighting chance of achieving economic equality.
At the Black Innovation Alliance, we are committed to building the ecosystem necessary for Black entrepreneurs, innovators, and creatives to thrive. Our member organizations function as the front line of support for Black owners across the country. And our work is committed to ensuring that they have what they need to be the bridge.
But that’s not enough.
We need clear pathways for entrepreneurs and business owners, which make the journey less difficult. This requires systems-oriented thinking, collaborative solutions, and deep investment.
Closing the racial wealth gap within a generation is possible. But it will require that we take a different course.
