In under-resourced Black and Hispanic American communities, starting small businesses can be a pathway to empowerment and self-determination. But in both the past and present, many obstacles have stood in the way. Even as the issue has drawn more attention from local nonprofits, educational institutions, and government programs, the overall rate of minority business ownership still lags the share of the US population.
To find new pathways into the problem, researchers at the University of New Orleans (UNO) developed a promising approach in a somewhat surprising part of the population—teenagers. Teens’ propensity for risk taking and experimentation has proved a solid foundation for entrepreneurship.
University of New Orleans Urban Entrepreneurship and Policy Institute director Chris Surprenant and economist Greg Price, who conduct research on the causes and consequences of economic racial inequality, explained the problem and how their team has decided to focus on high school students.
The elusiveness of business ownership
Historically, in New Orleans, Atlanta and other cities, people from minority communities form businesses at a lower rate than elsewhere in the country.
According to the US Business Administration, Black and Hispanic Americans own only 8 percent of employer businesses despite representing nearly one-third of the U.S. population.
Furthermore, Black business owners are much more likely to employ only themselves than to hire other workers, according to a Brookings report.
Over a three-year period, researchers at UNO surveyed and interviewed owners of established businesses, potential entrepreneurs, and teens. A forthcoming paper by Greg Price indicates some effectiveness of business clinics for Black entrepreneurs. But the gains may be short-lived, he added. “It is the long run that is always uncertain.”
A separate large study found minorities did not have long-term success at entrepreneurship after a federally subsidized training program in three states. Even with these programs, economists agree that most minorities still lack access to capital and access to the market, said Price—a result of structural racial inequalities, he added.
In a forthcoming paper, Chris Surprenant described how potential entrepreneurs struggled to make the jump from a supplemental side gig to full-time self-employment. One person worked a low-paying, part-time job and qualified for section 8 housing, the free and reduced school lunch program for their kids, and other forms of social assistance. But he knew that if he moved a “side hustle” to a licensed, registered business, his family would no longer qualify for many government benefits and would pay higher taxes.
Though a jump in income might occur eventually, some people don’t have a way to support themselves as they make a transition to self-employment—a move that often takes upfront capital. The Small Business Association estimates one needs at least $3,000 to start a home-based business.
“You’re in this situation where you can only grow your business so much if you are operating under the table,” said Surprenant. “It’s far easier to address on the front end,” he added.
That’s why UNO is beginning their next phase of research by working with younger groups.
Fostering teen dreams
In the new research project, Price and his colleagues want to know if teens’ aspirations can be cultivated with improved business education. Through surveys, they noticed that teens in Atlanta and New Orleans were more likely to run their own business if they had also taken a high school business class. What’s more, 63 percent of students surveyed plan to run a business in the future, and again, there’s an uptick for students who had taken a business class.
Like many in past generations, teens make money by babysitting, reselling clothes, tutoring, cutting lawns, and playing music at events, among other things. Overall, high school students were much more entrepreneurial than researchers at the UNO’s Urban Entrepreneurship and Policy Institute anticipated.
Since it appeared there was a connection between taking business class and starting one’s own independent venture, researchers tried to understand more in interviews. Every state in the southeastern U.S. requires high school students to complete some coursework in financial education, but they found that students did not often remember what was taught in the formal coursework.
So, where did teens learn about business or finances? Of course, sometimes they learned from experienced parents, but other times they learned as they ran their own informal businesses, said Surprenant. “It seemed by the interviews we were doing that the kids learned the stuff by the process of running their business. I was surprised to see what looked to be a pretty significant difference in knowledge and skills by the kids who have started their own businesses.”
Beginning this year, the institute will work with schools to redesign business education curriculum, specifically asking: “Will [students] learn better through starting a business than just sitting in the classroom?” said Surprenant. “And if so, what are the relevant skills and knowledge they learn better?”
The program will benefit public schools, which don’t always have the funding to bolster non-core subjects like this. “How can we make the curriculum for our students better? The schools are very receptive,” said Surprenant.
Thus, the institute is focusing on where young people are already motivated: working their own ventures. Over the next six months, a group including Marques Colston, a former New Orleans Saints football player, entrepreneur and new UNO business faculty member, will work with high school teachers across the Southeast to develop curricular content.
Like the new high school program, Colston’s business students also work their own businesses for the class. “For them to have an opportunity to be supported by the school setting up an entrepreneurial venture or support something that they already have going on—that’s something that looking back I wish I had as a student,” Colston told a local journalist during his first semester offering the course. “The goal is to create something of value that these kids can carry forward and activate quickly.”
Students who participate in the high school program will be eligible for UNO’s dual-enrollment program, giving them college credit for completing the course.
During the courses, researchers will survey students and conduct interviews to inform the development of future curriculum for the most effective engagement.
Price wants to know if financial literacy coursework in high school can affect students’ economic mobility later in life.
Through this program, he can structure surveys to help answer those questions. At the end of the study, they will survey the young people and see how the course impacted their college decisions.
Price wants students to be able to think through whether taking on student loans will benefit them in the long term or how to plan a career as a florist or a barber, considering what returns that type of self-employment could bring. Thus, coursework will include things that are relevant to students’ current or near-term needs, such as saving, budgeting, and how interest rates work, while likely not addressing long-term financial planning such as retirement contributions.
Additionally, they will compare different models to see where student outcomes improve the most—whether learning through traditional classroom teaching or by engaging in learning through running a business. Educators will also gain understanding of what’s being taught in different states.
Price and Surprenant want to see their research applied in concrete public programs and policies that help urban communities thrive. While they experiment in New Orleans and Atlanta high schools, the implications of the research are relevant to urban areas all across the country.