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April 27 2016

Silver Lining: The Recession Boosted Female Entrepreneurs of Color

Patrice J. Lee

In hard times, people become resourceful and that is evident in some of the data on the creation of new businesses that started during the most recent recession. Women business owners from communities of color apparently drove the lion share of business creation and job growth.

Business creation is a critical piece of the economic puzzle that did not do well after the recession. Trends seem to be reversing though as Millennials jump into entrepreneurship, but women from communities of color are increasingly driving our economy forward one LLC or sole proprietorship at a time.

New research from the Center for Global Policy Solutions finds that from 2007 to 2012 females from communities of color added nearly three out of four new jobs during those years. This is good news and confirms the strong entrepreneurial spirit in these communities, especially in immigrant communities.

Analyzing Census Bureau data they found that nearly all communities of color experienced significant small business growth. Asian American women-owned firms was the leader with a 37.6 percent growth rate, followed by Hispanic women (26.5 percent), and black women (20.2 percent). Hispanic and Asian men also saw rises in business creation, but black men experienced a decline.

Most of these businesses employ no one else other than the founder and the majority of them (67.3 percent) had sales of under $25,000. However, about 80 percent of those who employed staff earned more than $100,000. This makes sense since small businesses are difficult to sustain and grow. Their maturation process often means that once they hit a certain revenue level they can be stable and expand to hire staff. The report highlights that sales tend to lag for women-owned businesses.

Entrepreneurship is an attractive option to communities of color facing the Obama recession and recovery which left many out of work and good jobs behind.

Wall Street Journal reports:

“It shows the appetite and the desire for business ownership amongst communities of color,” said Maya Rockeymoore, the president and CEO of the Center for Global Policy Solutions, which focuses on social equity and hosts a summit in Washington this week calling for new policies to help boost minority entrepreneurship. “That is what we’re trying to tap into.”

The report underscores separate research suggesting many minorities saw entrepreneurship as an attractive option—or perhaps the only option—in the face of harsh economic conditions and dim employment prospects.

“The recession years were by necessity an opportunity for people of color in general, and women of color specifically, to actually have a personal response to the Great Recession—when many people of color were laid off in greater proportion—by creating businesses,” Ms. Rockeymoore said.

Two of the three key policy recommendations are excellent and would benefit business owners of all races: encouraging entrepreneurs to seek mentorship and adding entrepreneurship as a part of career and technical education for high school students. However, tax incentives for venture capitalists to invest in minority-owned businesses that help them overcome lack of access to capital are well-intentioned, and we hope there won't be unintended consequences.

In addition, the report throws in more funding for public K-12 education and freezing tuition increases and fee hikes. We throw enough money at public education and it still fails our students. Meanwhile, the exponential growth in federal funding and the increase in college enrollment is directly responsible for the increase in college costs. More public money is not the solution--cutting regulation is. The burdens of compliance can erode the bottom line of a fledging venture.

Communities of color should be encouraged and empowered to start and grow as should entrepreneurs in all demographic groups. Getting government out of the way is the key to making that happen, not more intervention.

Independent Women's Forum is an educational 501(c)(3) dedicated to developing and advancing policies that aren’t just well intended, but actually enhance people’s freedom, choices, and opportunities. IWF is the sister organization of the Independent Women’s Voice.​
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