[...] Nevertheless, the gap between black and white rates of self-employment remain roughly as large as they were in the early 20th century, according to Robert Fairlie, a researcher at the University of California at Santa Cruz.
Fairlie thinks the gaps in wealth and self-employment may be related. New entrepreneurs typically often draw on their own wealth or family savings for start-up capital. Even if they borrow from a bank or bring in outside investors, personal or family assets are often used as collateral.
Owning a business isn't a guaranteed path to riches, of course. Many new firms fail, and many others struggle along, their owners working for what amounts to a minimum-wage level of profit.
But business owners can provide benefits to their families and communities that go beyond the bottom line.
Fairlie has found, for example, that having a family member who owns a business greatly increases the odds that a young person will later on start or run a business as well. Success rates also improve for those with family business experience.
This has nothing to do with inheriting a business directly. It's not that sons or daughters of hardware-store owners or accountants tend to emulate their parents, following in similar fields.
Rather, Fairlie thinks, the children of business owners inherit some "general human capital" - a sense of how business works, along with whatever specific knowledge, contacts and cash are needed to start out on their own.
Family businesses don't merely create wealth for their owners; they also reinforce and strengthen community networks through a firm's ties to its customers, suppliers and even competitors.
Thus the relatively low rate of African American business ownership is especially problematic, Fairlie believes. "Business ownership has historically been a route of economic advancement for disadvantaged groups," he wrote last year. [...]
| That's the bottom third of Andrew Cassel's registration-required Philadelphia Inquirer column "Black middle class continues to grow, but gaps remain"
posted in articles on July 12, 2004 2:38 PM | t (0)
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