Young Adult's Race, Wealth, and Entrepreneurship

Author(s): 
Friedline, Terri
West, Stacia
Project(s): 
Financial Inclusion
Publication type: 
Brief

The current young adult generation is expected to lead a resurgence in entrepreneurial activities in the United States and these activities are expected to drive economic growth in the coming years. However, young adults may find it difficult to fulfill the expectations of becoming entrepreneurs and drivers of economic growth. This is because entrepreneurial opportunities are typically reserved for the wealthiest and most privileged Americans who have the financial resources needed to invest in starting small businesses, such as savings and access to credit. In contrast, young adults have not had much time to save money, build credit, or accumulate wealth. Moreover, given historic wealth inequalities rooted in racism and discrimination, young adults from racial and ethnic minority groups may be left out of the entrepreneurial resurgence and its economic benefits. This study analyzes nationally representative, longitudinal data to addresses the questions of whether young adults' wealth can support their entrepreneurial activities by becoming self-employed and whether black and Latino/a young adults leverage their wealth differently to support their entrepreneurial activities. Generally, the probability of being selfemployed;increases for all young adults as they accumulate wealth. However, wealth may play an outsized role in the self-employment of black and Latino/a young adults. Black and Latino/a young adults may not be able to rely on taking out a small loan at a bank or credit union in order to open their business; instead, they may be forced to use their own limited wealth for pursuing entrepreneurship. Policies are needed that support wealth accumulation (particularly for racial and ethnic minorities), remove discriminatory lending practices, and provide young entrepreneurs with access to credit.

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Citation: 

Friedline, T., & West, S. (2015). Young adults' race, wealth, and entrepreneurship (AEDI Research Brief). Lawrence, KS: University of Kansas, Center on Assets, Education, and Inclusion.

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