May 21, 2018

By Bob Coleman
Editor, Main Street Monday

Main Street Monday — Low-Income Areas Lack in Employment

Only one in fifteen businesses (6.7%) with employees and two in eleven self-employed persons are in low-income areas, in spite of the fact that two in nine workers call these areas home.

SBA’s Office of Advocacy shows overall lower participation in self-employment and business ownership in low-income areas, regardless of demographics.

Characteristics of these businesses differ considerably from higher income areas. For those businesses with employees ones in low-income areas had fewer employees, twelve vs. fifteen in other areas.

Businesses in these areas also appeared to be less opportunistic in terms of employee compensation and owner income than those in other areas. Average payroll per employee was more than $15,000 less in low-income areas at $33,071.

Greater percentages of the entrepreneurs in low-income areas are minorities, but a lower percentage of overall workers in minority groups are self-employed — 9.2% of the self-employed are black and 16.5% are Hispanic.

Additionally, the self-employed in these areas tend to be younger and less educated.

Much of the differences in entrepreneurship between lower- and higher- income areas can be found in the disparities between racial groups. For example, over 30% of the difference can be accounted for in the disparity between blacks and whites alone. The agency is encouraging research into how entrepreneurship can be enhanced to benefit low-income areas.

View the full report.