Business ownership is foundational to the American dream. But in the century after the abolition of slavery, black Americans faced discriminatory laws and societal hurdles that made starting a business difficult if not impossible. These obstacles helped fuel racial wealth gaps that persist today.
The disparities are stark. In 2019, the median net wealth of a white family in the U.S. was about $171,000, compared to $17,000 for black families, according to Brookings.
A lack of wealth often means a lack of opportunity.
For example, wealth enables people to secure loans for a business or a home. It serves as a cushion when a family member suffers an emergency, like a health problem or a job loss. And wealth can be passed down generationally, helping to establish a financial foundation on which future generations can prosper.
Removing the barriers to business ownership for black Americans could help change the story of American wealth inequality. That’s the driving mission at the Kauffman Foundation — a Kansas City-based nonprofit that’s spent decades equipping young people with the skills and resources they’ll need to have a great career or become successful as entrepreneurs. It’s a mission that starts with rethinking education.
Sparking the entrepreneurial spirit
As technology and the economy evolve, so too should the ways schools educate high school students. Most school systems, according to the Kauffman Foundation, need to change quickly to better prepare kids for the realities of the modern economy.
To meet that need, the foundation developed the Real World Learning Initiative, a framework for offering high school students the practical skills and hands-on experience necessary to navigate adult life, postsecondary education, and careers.
“In an increasingly globalized gig economy, more viable postsecondary options exist now than ever before, including industry recognized credentials, high skilled training, associate and vocational degrees, and work experience credits,” reads the Real World Learning Initiative website. “High schools must embrace this changing workplace and encourage students to choose a postsecondary experience that fits their passions.”
In 2020, Kansas City Public Schools began implementing the initiative with the goal of having each student attain a “Market Value Asset” by graduation. The asset can come in different forms, such as an internship, entrepreneurial experience, college credit, or industry certification.
“It’s time to move away from this chalkboard-era of teaching and learning,” said Mark Bedell, superintendent of Kansas City Public Schools. “We need to be modern, because the world and the economy that these kids are graduating into is not a traditional model.”
This practical approach to education appealed to Kansas City businesswoman Thalia Cherry. As a black entrepreneur who founded a sports clothing store in 2012, Cherry knew firsthand that starting and growing a successful business requires skills not typically taught in schools. But despite her own success, she was troubled to read a 2019 LendingTree report that ranked Kansas City 49th out of 50 of major U.S. cities in terms of the longevity of minority-owned businesses.
The report led her to start Entrepreneurship KC, a five-week program that helps young people gain direct access to entrepreneurs. Using the Kauffman Foundation’s Real World Learning Initiative as a framework, the program has students earn Market Value Assets by helping to solve problems for local businesses or by developing their own business ideas. Meanwhile, educators and entrepreneurs help students foster skills like self-reliance, innovation, risk tolerance, and opportunity recognition.
“What has been so profound about Entrepreneurship KC is that you can shift the thoughts of young people in a way that can influence their life, but also their communities.”Thalia Cherry
Boosting entrepreneurship in Kansas City and beyond
Kansas City is a fitting location for a project aiming to boost black owned businesses and entrepreneurship, considering the consequences from 20th-century discriminatory housing and banking practices still linger across the city today.
“We have an economically divided city,” Philip Gaskin, Vice President of Entrepreneurship at the Kauffman Foundation, told Freethink. “Some have a better chance at starting and growing a business here than others do.”
Boosting black business ownership could change the story. After all, the racial wealth gap in the U.S. narrows significantly when you consider only black business owners, who have a median net worth that’s 12 times higher than black Americans who don’t own businesses.
But while the rate of black owned businesses has been increasing in recent years, progress has been slow. Recent Census data show that black Americans comprise about 14% of the population, but own only about 2.2% of businesses across the country. The share of black Americans who receive loans through the Small Business Association is roughly the same.
The lag in business black business ownership is understandable when you consider differences in access to capital: new black-owned businesses start with almost 3x less in terms of overall capital compared with new white-owned businesses. And while the disparity in capital investment declines, it does not disappear even by the seventh year after startup. This discrepancy partly explains why black business owners suffer higher levels of debt.
Closing the racial wealth gap through increased black entrepreneurship may be possible, but it’s not a simple task. A 2021 study published in the Journal of Economics, Race, and Policy noted that increasing black business ownership is often seen as a panacea for narrowing racial wealth gaps, but that starting a business is inherently risky, especially for black Americans. The best way to close the racial wealth gap, the researchers argued, would be to ensure that black entrepreneurs can get fair and affordable financing.
The finding underscores the reality of American entrepreneurship: success often depends on wealth. That’s why Entrepreneurship KC utilizes an educational framework that focuses not only on developing creative business ideas, but also on the practical, nitty-gritty skills young entrepreneurs will need to survive in the business world.
The goal is to cultivate entrepreneurs who can enrich both themselves and the community.
“Every movement starts with one person that’s got an idea to change conditions in their neighborhoods,” Gaskin told Freethink. “Entrepreneurs have that.”