More Marriages and Entrepreneurs Needed

A lot is made of the fact that African Americans lag far behind American households in average household incomes and wealth.

For example,  African Americans in 2019 had a median household income of $44,000 compared to an overall median for all households of $63,000 and White households averaging about $66,000.

The argument is that this is due to systemic or institutional racism of some kind.

However, if that is that case why is it that so many Asian Americans, many of which are recent immigrants, are actually doing much better than native-born White Americans?

Part of the reason for the disparity in the numbers above is simply due to the fact that the percentage of African-Americans living in married households is so low.

Only 33% of African American adults are living in a committed, marriage-based household.

That compares to 57% for Whites and 63% for Asians.

Of course, married couples have the potential for two incomes to support the household and also enjoy the economic advantage that go with shared expenses. Two can not live cheaper than one but a couple can clearly live cheaper than two singles living separately.

Is white privilege or systemic racism the reason Blacks do not get married?

Source: https://www.pewresearch.org/social-trends/2019/11/06/the-landscape-of-marriage-and-cohabitation-in-the-u-s/psdt_11-06-19_cohabitation-01-05/

In looking at the data, it seems to me that another major reason for the lower average household incomes of African Americans is the relatively small number of entrepreneurs in this demographic group compared to their representation in the population.

For example, compare the statistics on Black-owned businesses to Asian-owned businesses in the United States in 2020 according to U.S. Census Bureau data.

There are five times as many Asian-owned businesses who are employers as there are Black-owned businesses.

The gap is even larger when considering the gross receipts of these businesses.

Asians generated $841 billion in receipts compared to $141 billion for the Black-owned businesses.

This is despite the fact that there are over twice as many Blacks in the U.S. population (12.6% of the total) compared to Asians (5.9% of the total).

This means that on a per capita basis there are about 10 Asian-owned businesses for every one Black-owned business in the United States.

The standard response to this difference would undoubtedly be that systemic or institutional racism is responsible for the lack of black entrepreneurs.

However, aren't Asians also people of color? They are certainly not part of any traditional white privileged power structure in the United States.

As stated above, most also have the additional disadvantage of being immigrants with language and cultural challenges.

Why does black entrepreneurship lag other races? (Hispanic entrepreneurs also are double the number of Blacks on a per capita basis as a percent of the population).

As a counter to the racism argument I recently came across an interesting study that indicates that businesses that identify as being Black-owned actually are at an advantage in attracting customers.

The study found that businesses labeled as Black-owned received 36% more page views, 52% more website views, 71% more calls, 34% more orders, and 36% more revenue than the average business.

Credit: https://twitter.com/cremieuxrecueil/status/1681124963460284417

 

Source: https://www.nber.org/papers/w30932

Is racism a reason there are not more Black businesses?

This study suggests the the opposite is true.

There is another recent study that also contradicts the racism narrative.

It actually shows that Whites are the least racist group in the United States. They are the least likely to rate other races negatively and their own race highly.

Blacks are the most likely to rate their own race highly and other races lower.

Credit: https://twitter.com/profstonge/status/1695771984393601325

If racism is not the reason we do not have more Black entrepreneurs why is that the reality?

It is also a fact that in the years before World War II there were a lot of successful Black businesses in most large American cities.

These businesses prospered in an era when segregation was the rule in many locales and Blacks were not welcome at many White-owned establishments. This led to many Black entrepreneurs stepping up to serve their fellow citizens with all types of goods and services.

One prime example of this was the Greenwood section of Tulsa, Oklahoma which came to be known as Black Wall Street for the number of successful Black businesses in that area that included banks, clothing stores, cafes and the like.

The success of those Black businesses created animosity from some in the White community which led to one of the most horrendous cases of race violence in American history in which the Greenwood section of Tulsa was destroyed.

A short description of what led to the violence and the impact.

But in 1921, race riots broke out that destroyed the community and its businesses. When a white woman alleged that a Black man had attempted to rape her, white mobs protested outside of the courthouse to demand justice. This quickly turned to riots in Greenwood and the streets and buildings went up in flames. Three hundred people died and 800 were injured. The only people arrested that day for the violence were Black people. Local and national news outlets misrepresented the riots as an uprising of violent Blacks citizens.

The community never recovered.  

Unfortunately, in the era we live in today, Black businesses are most likely to be destroyed in Black Lives Matter protests or other race riots that are centered in urban areas in which other Blacks are the perpetrators. 

Is this risk a reason why more Black entrepreneurs do not come forward to own businesses?

Is it lack of access to capital? If so, how do the Asians do it?

One theory is that the lack of Black entrepreneurship is caused by a cycle of dependency that seemed to take hold about the same time as the Great Society programs of the 1960's were introduced. The social safety net became so big that it left the spirt of entrepreneurship in the Black community entangled in it.

Asian immigrants were not so restricted by this cultural norm. They largely come from a culture where little is given or provided. They come from a culture with billions of people competing for scare resources and opportunities. You have to hustle to survive. That attitude accompanies Asians who come to the United States.

I saw the same attitude when I recently traveled in Greece, Egypt and Turkey. It was clear that people in these countries knew that they had to hustle to survive. They do not have much government support to fall back on.

I don't know what the answer is to facilitate and create more Black entrepreneurship in the United States.

However, I am certain that increasing the number of Black-owned businesses would have an enormous impact on reducing the income/wealth disadvantage that we see in the United States.

Our politicians would be well served in focusing on creating more entrepreneurs rather than focusing on putting more emphasis on initiatives and government programs that would create more dependency.

We need more African Americans with an ownership mentality.

We also need more African Americans who are married.

More marriages +  More entrepreneurs = Less income disparity for African Americans.

It is pretty simple math. 

Why is it so hard for the policymakers to figure it out?