How Women of Color Are Driving Entrepreneurship in the US
January 9, 2015 10:57 PM   Subscribe

Women of color are a principal force behind one of the most important components of America’s current marketplace and our nation’s future economy: entrepreneurship. Today, women of color are the majority owners of close to one-third of all women-owned firms in the nation. Increased access to business capital—including microenterprises, venture-capital-funded firms, and crowd funding—has helped the number of women entrepreneurs grow substantially. But women of color face significant obstacles in starting their own businesses, leading to the question of why so many of them turn to entrepreneurship. The growth of women of color as business owners is part of a long-term trend, but the question of why this trend is occurring is often left unanswered. Looking at the alternative to entrepreneurship—the traditional workplace—sheds light on some of the reasons.
posted by infini (9 comments total) 24 users marked this as a favorite
Step by step--business by business. Moving in a useful direction. Thanks
posted by rmhsinc at 4:58 AM on January 10, 2015

Spoiler alert: "structural obstacles in the traditional workforce limit women and push them to find alternatives"
posted by Potomac Avenue at 5:19 AM on January 10, 2015

(assume "in the US" and "privately owned businesses not equally owned by men and wopmen such as businesses owned by husband/wife" for everything that follows)

The growth trends she reports for WOC entrepreneurs are really intriguing! But as someone who tends to look at things more from the social science/analytical side of things rather than a policy person, I think the explanation for why this is happening now (i.e., over the past 15 years) completely fall apart. When you look at the raw numbers, you see that following a period of strong growth, WOC entrepreneurs are approaching rough proportionality to their percentage share of the female population, and continue (along with women as a whole) to trail behind men in terms of representation among all business owners.

Digging into the citations in the PDF version of the article, it cites a report stating that in 2013, 31% of female-owned businesses were owned by WOC, compared to only 17% in 1997. So even now, WOC have made tremendous progress but are still be less slightly unreprepresented in the ranks of women entrepreneurs comared to their white counterparts, given that WOC account currently account for for 38% of the female population.

The stats get even more lopsided when you look at business owners as a whole. Calculating based on numbers in the AmEx report, I find that WOC are about 16% of the population but own about 11% of all businesses. Non-Hispanic white males are 31% of the population but own 51% of all firms. (looking at business volume, everything becomes completely unbalanced in favor of white men. no stats presented on rate of failure, but that would be important to look at too).

Given this, and given the fact that the % share of businesses owned by women, and women of color, has been increasing significantly over the past 15 years, the explanation that discrimination in the traditional workplace is the driving force behind this trend seems quite unlikely. If that were the case, it would mean that discrimination in the traditional workplace has also significantly increased over the past 15 years. Rather, the likely explanation to me is that historically the barriers to women's success (and that of WOC) in the business world have been HIGHER than barriers to success in the traditional workplace (hence the underrepresentation of both classes among all businessowners) but that those barriers have begun to be counteracted by efforts made in recent years, such as special mentorship programs, credit facilities, etc. That observation might lead to the same policy conclusion: "we need even more of that stuff", but I think it also behooves the analysts and policymakers looking at this phenomenon to identify "best practices" that will lead to lasting improvements for the livelihoods and quality of life of WOC.
posted by drlith at 6:41 AM on January 10, 2015 [8 favorites]

The other big difference in the time period you've analyzed and which seems to have been completely overlooked in the report (and I wouldn't have noticed if I hadn't read your comment thank you) is the introduction of the internet, the web, and all the beneficial aspects of social networks, word of mouth and trusted referrals being a boost to opportunity and scale.
posted by infini at 7:22 AM on January 10, 2015 [2 favorites]

Ah, that's a good observation too! I almost mentioned the snowball effect and how just seeing women around you launching businesses helps to position that as a viable alternative. And I know that in my own case (woman, but not WOC) the internet has been critical in my ability to become successfully self-employed.

One of the reasons I think it's important to look at "best practices" and drill down carefully into raw numbers comes from my experience of seeing so many MLM businesses sprouting up among friends in my social networks. I think there's a danger of "ghettoization" where women entrepreneurs are still largely pursuing small scale, risky businesses with low ROI such as MLMs, Etsy shops, or even blogging, that are compatible with the traditional barriers to women's equal participation in the productive economy (domestic responsibilities, lack of access to capital, etc.)--rather than fully dismantling those barriers.

For example, one of my translation agency clients is a one-woman shop, and she's been struggling this past year as she's faced difficulty balancing business demands with some new health issues and being a widowed parent to 2 kids. Now, this is a type of business where it is possible to grow from a one-person shop to a larger-scale business. But as long as you're a sole proprietor, you're the only person there to put out the fires, it's practically impossible to schedule an actual vacation, and if you get sick there's no one there to pick up the slack (this is one of the many reasons I have no plans of "graduating" from freelance provider to a so-called "kitchen-table agency" owner). To cope with her current struggles, rather than seeking ways to grow her business and take on some employees to the responsibilities so it's not all on her all the time, she's picked up a MLM business (prepaid legal) on the side. It really worries me, because she's a great person to work for and has been dealing with kind of a crap hand in life.
posted by drlith at 8:00 AM on January 10, 2015

I think about this question a lot. I am at an hbcu in a very rural region where poverty and violence are endemic. It is surprising by how many students aim to own a small business and land for its own sake. Their cohort at predominately white institutions (pwi) tends to aspire to executive "leadership" roles.

When I note the difference and ask students about it, black students tell me that ownership matters to them because so much has been taken from black people in the past.

Female students have realistic business ideas: hair care product store, salon, and day care. There is strong demand for all of those services. They are necessary to the black community, in fact. There is no analogue for male students. They will tell me "record label executive" and "promoter." Those ideas do not go anywhere.

The elephant in the room is the gross injustice inflicted on black men by the legal system. Many of my students have been arrested so many times before they even graduate that their access to credit is severely limited.

So I wonder about hair. Black hair care is a niche market with nearly inelastic demand, black salons are social spaces vital to black women, and there is white prejudice against touching black hair and bodies.


If I were to start a business of my own, I would find a black female partner and "multiracial" salon. That would be one way to confront racial taboos using market forces and feminist ethics.
posted by CtrlAltD at 9:55 AM on January 10, 2015 [4 favorites]

I question the reliability of statistics on woman-owned businesses, based on anecdata. There are some tax incentives for women owning businesses, and I know of one man (right-wing & anti-government "handouts," naturally) who is starting a new business and is planning to have his wife be the owner on paper while she will have no role of significance in the operations.
posted by univac at 12:13 PM on January 10, 2015

CtrlAltD: "So I wonder about hair. Black hair care is a niche market with nearly inelastic demand, black salons are social spaces vital to black women, and there is white prejudice against touching black hair and bodies. If I were to start a business of my own, I would find a black female partner and "multiracial" salon. That would be one way to confront racial taboos using market forces and feminist ethics."

My school district (re-)started a voc tech program, and FAR AND AWAY the most popular program is the beautician track, which gets its graduates both a college-ready diploma (that meets requirements for the flagship state U) AND a beauty license by graduation, complete with the 150 hours of supervised practice on the public. It is so popular they have added "natural hair care" (what the state calls the certification for typically African-American hair care stuff, like braiding) and "barbering" and the program fills up immediately.

PLUS since they have to get in their 150 hours of supervised practice on the public, they run a salon out of one of the high schools where you can get $10 PEDICURES Y'ALL. My toes have never been so consistently pretty!

But it really is great, all of these girls (mostly girls, some boys in barbering) can find jobs as soon as they're certified, and they do entrepreneurship classes too with local entrepreneurs and the city's small business administration thing and local bankers and learn all about how to actually start a salon; and the local salon owners and salon products stores have been so INCREDIBLY supportive, and it is this previously untapped reservoir of black women business owners who are now really invested in the local schools and who are mentoring our students, some of whom have never really had black professional role models before. This turned out to be the SECRET KEY to unlock this whole community of African-American business owners (especially women) in the area that we had just never reached by more traditional outreach to the business community.

(About half the girls intend to work in a salon to help support themselves at college; the other half intend to go right to work full-time after school. A startling number of them want to study business in college because they got hooked on it through learning about starting salons.)
posted by Eyebrows McGee at 4:31 PM on January 10, 2015 [4 favorites]

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