Bridging the Wealth Gap: 2019 Update

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At the 2018 US Conference of Mayors (USCM) Annual Conference, USCM and Interise presented a joint paper entitled Bridging the Wealth Gap, which analyzed one of the most challenging situations facing America today. The paper highlighted the need for more focused and systemic approaches to closing the wealth gap, particularly by encouraging and supporting small business entrepreneurship and ownership.

At the 2019 USCM Annual Conference taking place this week in Honolulu, Hawaii, Interise  presents updated data that shows that the wealth gap persists.

  • The richest 10% of households hold 70% of total household wealth, most of which is in high yielding stocks and mutual fund investments.
  • Most of the wealth in the bottom 90% comes from a single source: home ownership. However, home equity was significantly reduced during the Great Recession and is still recovering in some areas.
  • Many households in the bottom 90% have negative wealth--they have more debt than assets--which is particularly true for black and Latinx households.

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The Staying Power of Established Small Businesses

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Small businesses create over 56 million jobs for American workers. But not all small businesses show the staying power to keep these jobs and further drive inclusive economic development. Mature, established small businesses are more likely to contribute positively to net job creation and pay higher wages, on average, than younger firms.

According to data from the Federal Reserve Bank of St. Louis, while startups create many jobs, the up-or-down of start-ups leads to low levels of net job creation after the initial year.

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Proven Model for Inclusive Economic Development | 10-Year Series

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Small business owners in low- and moderate-income communities and/or from historically disadvantaged social and economic groups often lack the business knowledge and management know-how necessary for second-stage growth. Additionally, they are often excluded from the networks that comprise the larger business ecosystems, including financing and procurement. To catalyze a more inclusive and equitable small business ecosystem, Interise developed the StreetWise 'MBA'™.

According to Intersise's 10-Year Report, companies that successfully completed a StreetWise 'MBA'™ program outperformed the private sector as a whole, consistently achieving net new job growth in both boom and lean economic years. Even in the Great Recession, Interise businesses continued to create jobs.

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Small Business as a Sustainable Solution

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(This blog post is the last in a series. Read the previous posts here, here, and here.)

The previous posts in this series discussed the relationship between the racial wealth gap and small business, what created the racial wealth gap, and how it has impacted small business, especially minority-owned small businesses. This week’s post brings good news: building capacity among minority-owned businesses and businesses located in low- to moderate-income communities may contribute to closing the wealth gap.

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The Wealth Gap’s Influence on Minority-Owned Businesses

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(This blog post is part of a series. Read the previous posts here and here.)

The racial wealth gap has significant implications for entrepreneurship in terms of access to capital. Most business owners turn to their own wealth or that of their friends and family when starting and operating a business. Minorities have lower levels of wealth on average, due to the policies and discrimination that created and maintained the racial wealth gap, and minority business owners therefore tend to have less of their own capital to invest in their businesses.

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The Roots of the Racial Wealth Gap

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(This blog post is part of a series. Read the previous post here.)

“The extent of and continuing increase in inequality in the United States greatly concern me…. I think it is appropriate to ask whether this trend is compatible with values rooted in our nation's history, among them the high value Americans have traditionally placed on equality of opportunity.”

Janet L. Yellen, Chair of the Board of Governors of the Federal Reserve System, October 17, 2014.

The racial wealth gap has been the subject of much focus lately. But where did it come from?

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