We are now living in a moment where we can address something that divides us and holds us all back - economic inequity.
More people across the political spectrum and professions are realizing that inequity is more than a chronic burden for the people who are stuck at the bottom of the scale. They see that an economy with our current levels of inequality is unsustainable.
The pandemic has only made our inequities – race, gender, and geography – more visible to more people. The gaps exposed by COVID are not new to any of us who work deeply in our communities. We see, experience, and try to address the inequities every day.
We’ve all seen the figures that show a growing wealth and income gap in the United States. Most countries are seeing similar if not starker levels. It includes an extreme concentration of wealth at the top, with the top 1% of Americans owning about 40% of the country’s wealth—and, it includes a growing gap between upper-income families and those with less. On top of that typical white families have 10 times the wealth of Black families. In a recent survey by the Ewing Marion Kauffman Foundation, we found that 41% of Black Kansas Citians would not be able to cover a $400 emergency expense. That’s close to the national averages.
Now, here is why this matters to all of us – not just those living with economic insecurity.
First, there is economic research. Studies for global organizations like the International Monetary Fund and the Organisation for Economic Co-operation and Development (OECD) have looked at comparisons across countries. They find that higher levels of inequality cut into overall economic growth, and also make it likely that growth cycles won’t last as long.
The key takeaway is: When inequities reach today’s levels, we all lose. Even if you’re “winning” in the current system, the foundations of that system are growing weaker.
Now here is the good news. Entrepreneurship can change this equation. Positive steps are already being taken—the kind that can rebuild and reinvigorate our economy so that it works better for everyone.
The Kauffman Foundation is part of a growing network of people and organizations like the Global Entrepreneurship Network dedicated to making our collective economies fundamentally stronger and more inclusive.
We have a simple, two-word vision. It’s called Inclusive Prosperity.
Inclusive Prosperity starts with recognizing that the economy is not a zero-sum game. Enabling more people to do better does not mean that others have to do worse. When more people do better, the impacts are generative. They generate positive ripple effects and multiplier effects everywhere.
When more people do better, demand increases—which lifts all businesses and the people who work in them. And when more people start businesses of their own, they create jobs and economic growth. This also means a bigger tax base for communities, more funding for services and amenities, and more charitable giving.
However, many people—including many business people—don’t realize how vital it is to focus on this aspect of our economy. Entrepreneurs and the companies they start are important for two big reasons.
They bring new things to market, meeting needs that were previously unmet. Since the pandemic began, many people have relied on Zoom—which is a product from a startup company. And to help control the pandemic, many of us had the vaccine from Moderna, another startup company. Even on a local level, if a new service shop or a small manufacturer gets started and takes hold, clearly it is providing something that people need or want.
And the other reason: Entrepreneurs create the most net new jobs. On average, companies over about ten years old lose or eliminate at least as many jobs as they add, which explains why areas that rely on existing companies in older industries are constantly struggling. Nearly all net job growth—meaning more jobs added than lost—comes from younger companies in the startup or early growth phases.
That is why entrepreneurs are essential. And unfortunately, many people have a misconception of where we stand. There’s a tendency to think that we Americans are living in a Golden Age of Entrepreneurship. Over the past few decades, we have seen waves of startup companies that grew big, from Apple to Amazon, Google and more. But these high-profile success stories, valuable as they may be, mask a few disturbing gaps that lie underneath.
Overall, per capita rates of new business starts in the U.S. have actually been declining or flat-lining over the past 40 years. There’s been an uptick recently, but it has to compensate for the many businesses that closed during the pandemic.
The demographic groups that lag or struggle the most in starting and growing businesses are people of color and women. Black entrepreneurs tend to have the least personal capital and the least borrowing ability to get their companies off the ground and poised for growth. Women are about half as likely as men to start a business, and their startups tend to begin small and stay small.
Imagine the growth that might be unleashed by getting more people of color and women into the game. At the Foundation, we’ve studied the barriers that people of color and women face in starting a business. We’ve also studied successful entrepreneurs and what helps them succeed.
We at the Foundation have summed up all the policies and practices needed to change the direction of our economies and workforce in a detailed policy platform, titled America’s New Business Plan. It delves into the common needs of all entrepreneurs to start and grow a business – access to opportunity, access to funding, access to knowledge, and access to support. These are the kinds of things that people of color, women, and people in remote or poorer areas are often lacking.
We are working with urgency to meet this moment, to fulfill our mission as we seek to prepare people for success in their jobs and careers, so that everyone has the opportunity to achieve economic stability, mobility, and prosperity.
When I think about the potential of Global Entrepreneurship Week to support entrepreneurs and build the community needed to meet this moment, I focus on one of my favorite quotes from Mr. Kauffman.
“All the money in the world cannot solve problems unless we work together. And, if we work together, there is no problem in the world that can stop us, as we seek to develop people to their highest and best potential.”
We can and will improve. The times demand it. And we will meet this challenge – together.