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Business, Diversity, and Education

A major reason for the long-term economic success of the United States has been its ability to create and sustain a vibrant and innovative private business sector. The more that is understood about the underpinnings of successful firms in the United States, the greater the ability of public and private entities to appropriately provide the factors required to sustain the vibrancy of the U.S. private business sector—thereby sustaining the resulting employment and economic development. This entry examines the relationship between education and business ownership and the impact of greater educational attainment on business ownership among African Americans, Hispanics, and women. Diversity among students whose education prepares them for business ownership will increase diversity in the workforce and can help to decrease differences in earnings based on race and gender.

Education and the Diversity of Business Ownership

Entrepreneurship is the creation and ownership of private business enterprises. Entrepreneurship contributes income, jobs, research and development, and innovations, generating economic benefits that are often larger than the private benefits reaped by the entrepreneurs themselves. However, this entry will take the perspective of the individual, not the larger economy. It has been shown that many persons in the United States aspire to own and run their own businesses. A major reason for this motivation is that business ownership can offer the entrepreneur economic independence and above-average income and wealth. For minorities and women, the economic attraction of business ownership is particularly meaningful. It is well known that there is a disparity in economic well-being between minority and White families and between men and women in the United States. The median family income of Black families, for example, is 60% that of White families in the United States. The median family income of Hispanic families is 70% of non-Hispanic White families. For full-time, year-round workers, the 2009 median earnings for women were 78% of men's earnings.

Another important measure of economic status is a family's wealth, where wealth (or net worth) is defined as the family's assets less its debts. William Bradford found that the median wealth of White families is 5.0 times that of Black families in the United States and that business ownership is one of the paths for the reduction in economic disparity in wealth. The median wealth of Black business owners is 8.0 times the median wealth of Black workers. For White families, the median wealth of business owners is 2.9 times that of workers. In addition, the existence of entrepreneurs in the Black population increases the overall median Black family/median White family wealth ratio. Thus business ownership increases wealth for both Black and White families, but it increases the wealth of Black families proportionately more than for White families.

Diversity in Business Ownership

Over the last 20 years, minorities and women have increased their participation in business ownership. However, business ownership among minorities and women remains relatively low compared to their percentage of the population. Recent figures reflect these relationships. As of 2007, people of Hispanic ethnicity, who represent 16% of the U.S. population, owned 2.3 million businesses. Although the number of Hispanic-owned firms increased by 43.7% between 2002 and 2007, Hispanic-owned firms accounted for 8.3% of all nonfarm businesses in the United States; and these firms received only 1.1% of total business receipts. In 2007, African Americans, who represent 13% of the U.S. population, owned 1.9 million businesses, an increase of 60.5% from 2002. These firms accounted for 7.1% of all nonfarm businesses in the United States and generated only 0.5% of all U.S. business receipts. Women owned 7.8 million nonfarm U.S. businesses, an increase of 20.1% from 2002. Women-owned firms accounted for 28.7% of all nonfarm businesses in the United States and generated 3.9% of all U.S. business receipts. This entry focuses on these three groups because Asian-owned businesses are close to parity for White-owned businesses in the United States. Despite increases in participation rates, for women and minorities there remains a lack of parity in the private business sector of the United States—business ownership and business receipts are dominated by White males. In this regard, the educational attainment of business owners has been a major factor in the increasingly (albeit still not satisfactory) diverse ownership of businesses by gender and race/ethnicity. The experience of African Americans in education, business, and diversity will be discussed, followed by comments on similar developments among Hispanics and women.

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