Small Businesses Serve as a Tool to Reduce Wealth Inequality
What has created two-thirds of all net new private sector jobs, helps close the racial and gender wealth divides, generates substantial ripples in local economic activity and increases quality of life in neighborhoods?
If you guessed small businesses, you're a winner.
People all across the United States are celebrating National Small Business Week, and it's another great opportunity to highlight the vital role small businesses play in our country.
The case for small businesses is overwhelming – they help consumers, wider communities, and the business owners themselves. White non-Hispanic families have about 13 times the median wealth of Black families, but the gap decreases by a factor of three when looking at White and Black business owners. Hispanic business owners' average net worth stands five times higher than that of Hispanic non-business owners. This significant wealth-building pathway benefits everyone, regardless of race or ethnicity.
And it's why we should help budding entrepreneurs start and grow their businesses.
First of all, we should avoid cutting programs that assist low-income entrepreneurs, as President Trump's budget aims to do. President Trump proposes eliminating the Community Development Financial Institution (CDFI) Fund and the Minority Business Development Agency. These drastic cuts would cause harm to many business owners, especially Black and Latino entrepreneurs who rely on non-traditional financial institutions for capital because they face discrimination from mainstream sources.
Instead of sliding backwards, we should move forward and expand the CDFI Fund and Minority Business Development Agency. Congress should reauthorize the State Small Business Credit Initiative, a 2010 program that provided lending to small businesses after large banks cut back on this lending after the Great Recession, and set targets for expanding credit to women and people of color. Moreover, Congress should expand the New Markets Tax Credit, which supports job creation in low-income communities.
We have a long way to go to ensure all members of our community can chase their dreams to start businesses. We should craft a welcoming, inclusive immigration policy that doesn't turn Muslim immigrants away but instead helps immigrants create businesses. Policies should promote entrepreneurship among people with disabilities who cannot find work in the hourly and salaried market, members of the LGBTQ community who face prejudice because of who they are and formerly incarcerated people who have paid their debt to society and want to re-engage in their community.
National policy changes will take time, but states can be proactive. Most states do not have policies that outlaw lending discrimination based on sexual orientation and gender identity. States and municipalities can establish themselves as sanctuaries for undocumented immigrants and reap the benefits that Deferred Action for Child Arrivals (DACA) recipients provide to their communities, including employment and entrepreneurship.
This Small Business Week, sign up for one of CFED's advocacy campaigns to help defend the CDFI Fund and various policies that promote entrepreneurship.