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Business ownership has always been a cornerstone of the American
dream. Many Americans have dreamed of owning their own business at one time or
another. The current social and economic climate presents unprecedented
opportunity for aspiring entrepreneurs. Advances in technology, corporate
downsizing, outsourcing, telecommuting, and the extremely low unemployment rate
have created self-employment or small business ownership opportunities that did
not previously exist. Activities that were once employer-based are now commonly
performed on a contractual basis by small businesses or individuals who are
self-employed. As a result, more people than ever are self-employed.
Approximately 10,507,000 Americans are self-employed, with about 1 million more
people reporting self-employment as a secondary source of income.
Economic Impact
Entrepreneurship and small start-up companies are largely
responsible for the impressive performance of the U.S. economy over the past
several years. While it is widely believed that big businesses drive the U.S.
economy, statistics demonstrate that small firms are, in fact, doing much of
the economic "heavy lifting." Small firms are responsible for 52 per cent of
sales and 50 per cent of private sector output. Small companies comprise 96 per
cent of all exporters of U.S. goods and receive 35 per cent of federal contract
dollars. These numbers may be particularly surprising in light of the fact that
53 per cent of the time, these businesses are operating from home.
During the recession of the 1980's, it was small businesses that
rallied, created new jobs, and enabled the U.S. economy to successfully
transition from the industrial age to the information age. Economists attribute
the ability of our nation's economy to outpace Europe and Japan to the
innovation of small firms and the opportunities they create for disenfranchised
groups to participate in the economy. Small businesses account for virtually
all net new jobs in the economy, representing over 99 per cent of all employers
and 52 per cent of the private-sector workforce. Between 1988 and 1990, the
nation's smallest businesses (those with under 20 employees) created almost 4.1
million new jobs, while large firms experienced a loss of more than 500,000
jobs.
Continued economic growth requires economic participation from
every sector of the population. With an overall unemployment rate below 5 per
cent–widely regarded as full employment– diversification of the
workforce is essential. Small businesses are the primary mechanism by which
people who have been socially and economically marginalized, such as younger
workers, older workers, and women, enter the workplace. Further, 61 per cent of
all private workers on public assistance are employed by small businesses.
Women- and Minority-Owned Businesses
Women, minorities, and immigrants have all used self-employment as
a vehicle for accessing the American dream and alleviating poverty. Minority-
and women-owned businesses are an important part of the U.S. economy, outpacing
the growth of other businesses.
Women-Owned Businesses
The Small Business Administration (SBA) reports that, "One reason
the U.S. economy has created so many new businesses in the past decades is that
many women have chosen self-employment over wage employment." In fact, women
own 34 per cent of all businesses (approximately 8.5 million)–an 89 per
cent increase in the number of businesses owned by women just a decade ago;
these businesses generated $3.1 trillion in revenues, an increase of 209 per
cent over a ten year period, even after adjusting for inflation. While
women-owned businesses have steadily improved their economic positions over
time, gaps in revenues between men- and women-owned businesses persist.
Women-owned sole proprietorships, for example, had average receipts that were
47 per cent less than those attained by men in 1990 and are expected to narrow
the gap by only 4 per cent by the year 2000. Women business owners are also
more likely to rely on non-traditional sources of capital and access commercial
bank loans less frequently than men. This difference may point to barriers in
accessing traditional sources of credit, although research studies arrive at
different conclusions on this matter. In spite of apparent inequalities, women
are clearly using entrepreneurship to successfully gain an economic foothold.
Minority-Owned Businesses
America has a strong history of business creation among immigrant
populations who have earned their livelihoods through entrepreneurship.
Immigrant, ethnic, and minority businesses often build upon a strong sense of
community in their business development strategies. Today, minority-owned
businesses are experiencing unprecedented growth. The number of minority-owned
businesses in the United States increased by 168 per cent in a ten year period
to an estimated 3.25 million businesses. Revenues for these businesses grew at
an even faster pace during the same period–an impressive 343 per cent
increase–to $495 billion. In spite of this growth, the share of
minority-owned businesses is still not proportional to the size of minority
populations. A 1992 survey by the Minority Business Development Agency (as
reported by the SBA) reveals the following:
- Hispanic Americans accounted for nearly 10 per cent of the U.S.
population but only 4.2 per cent of U.S. businesses and 2.2 per cent of all
business receipts.
- Blacks face the largest discrepancies, making up over 12 per
cent of the total population while only accounting for 3.6 per cent of
businesses and 1 per cent of all business receipts.
- Asian-owned businesses fared the best among the minority groups
examined, accounting for 3.5 per cent of all businesses, 4 per cent of the
population, and 3 per cent of all business receipts.
As the U.S. population becomes increasingly diverse,
minority-owned businesses are having a noticeable impact on our nation's
economy. The current buying power of minority groups is estimated to be $1
trillion, and this number will increase substantially over the next fifty years
as the minority population increases. By 2050 it is expected that 186 million
people who belong to minorities will live in America–making up 47 per cent
of the total population. Clearly, this is where many emerging markets exist,
and minority-owned businesses are well-positioned to take advantage of this
changing competitive environment.
Encouraging Entrepreneurship: Opening Doors for People with
Disabilities
Although entrepreneurship has been an effective tool for
alleviating poverty and increasing the standard of living among women and
minority groups, it has not been widely acknowledged as a mechanism for
advancing economic opportunity among our nation's largest minority
group–people with disabilities.
Characteristics of Americans with Disabilities
Commonly cited figures indicate that the number of Americans with
disabilities is 54 million, making them the single largest minority group in
the country. Disability cuts across all socioeconomic backgrounds, geographic
areas, and demographic characteristics. Despite the passage of the Americans
with Disabilities Act of 1990 and other progressive legislation, people with
disabilities continue to experience striking gaps in employment, income,
education, and other quality of life indicators.
The most striking disparity between people with and without
disabilities is the employment rate. Only 52.3 per cent of people with
disabilities are employed, and the statistics are even more stark for those
with severe disabilities, who are employed at rate of only 26.1 per cent. At
the same time, people who do not have disabilities are employed at a rate of
82.1 per cent. Despite the sharp incongruity between the employment rate of
people with disabilities and that of the general population, 72 per cent of
working age people with disabilities indicate that they want to work.
The high unemployment among people with disabilities has resulted
in a significant income gap between people with disabilities and the rest of
the population. People with disabilities are more likely to rely on
means-tested public assistance income. Earned income represents only 71 per
cent of the total income of people with disabilities and 41 per cent of the
income of people with severe disabilities. Conversely, earned income accounts
for 92 per cent of the total income of people who do not have disabilities. One
out of every three adults with disabilities live in very low income households
(defined as those with less than $15,000 of annual income), as opposed to just
one out of every eight non-disabled adults. Unemployment, however, is not the
only reason for the earnings gap. Even when people with disabilities are
employed, they tend to be compensated at lower rates of pay than their
non-disabled counterparts. The average family income in 1995 was $46,478, as
compared to $28,067 for families of people with disabilities, and the economic
effects of disability are multiplied for those belonging to other minority
groups.
People with disabilities are pursuing higher education at the same
rates as their non-disabled peers. However, educational attainment at the
secondary level is significantly lower–only 80 per cent of people with
disabilities graduate from high school. The high school graduation rate among
people who do not have disabilities is 91 per cent, revealing a sizeable
gap.
In spite of gaps in employment, income, and education, people with
disabilities are still a market force worthy of attention. With current
aggregate income of $796 billion (expected to exceed $1 trillion by 2001),
people with disabilities have discretionary, disposable income of $176 billion.
This largely untapped market holds economic promise for perceptive
entrepreneurs with and without disabilities.
Disability and Self-Employment Statistics
Business ownership as a means to achieving self-sufficiency has
only recently began to surface as a major topic of discussion relative to the
employment of people with disabilities. As a result, very little data is
available on the prevalence, cost, and success of businesses owned and operated
by people with disabilities. However, the limited data that is available has
provided an excellent starting point for studying and understanding this issue.
More than anything, this seminal research points to the need for further
research and analysis on this important topic.
Lewis Kraus and Susan Stoddard reported in Chartbook on Work
Disability in the United States in 1991 that 12.2 per cent of people who
experience a work disability are self-employed, compared to 7.8 per cent of
people who do not have a work disability. Nations Business, a publication of
the U.S. Chamber of Commerce, reported in "Can-Do Attitudes and the Disabled"
by Sharon Nelton, May 1998, that of 9.4 million sole proprietors in the U.S.,
1.7 million (18 per cent) report some disability or work limitation and 2.7 per
cent report a severe disability. This information was attributed to a U.S.
Census Bureau study, but is unidentified. While it appears that people with
disabilities are self-employed at higher rates than people who do not have
disabilities, people with disabilities are less likely than people without
disabilities to pursue self-employment on a full-time basis. It should be noted
that the numbers of people with disabilities and of people in general in
self-employment are not consistent across various studies, making it difficult
to draw definitive conclusions. A number of factors make it difficult make an
"apples to apples" comparison between the self-employment rates of people with
disabilities and those without. Differences in the years studied are one such
factor. Multiple interpretations of what constitutes self-employment also
complicate research findings–some consider all persons with any
self-employment income, others only count those who identify self-employment as
their primary source of income, and some individuals are involved with more
than one business venture. Further, disability is not a measured characteristic
in most general self-employment research and, when it is studied, definitions
of disability also vary.
Self-Employment within Vocational Rehabilitation Programs
Of the approximately 210,000 people with disabilities that
vocational rehabilitation (VR) programs helped obtain employment in 1995, only
2.7 per cent (5,670 people) became self-employed. Business enterprise programs,
such as the Randolph-Sheppard Vending Facility Program, accounted for only .15
per cent of successful case closures that year. These statistics are
significantly lower than for people with disabilities outside of the VR system,
suggesting that self-employment as a strategy for achieving self-sufficiency
could be utilized more frequently by VR.
This conclusion is supported by the recent experience of the
Choice Projects–demonstration projects funded by the Rehabilitation
Services Administration (RSA) to increase informed choice throughout the
vocational rehabilitation process. Choice Projects report that between 20 per
cent and 30 per cent of the individuals with disabilities who are participating
in the demonstration projects are becoming self-employed. This is significant,
especially in light of the fact that none of the Choice Projects had identified
self-employment as a focus until project participants requested the option.
These findings suggest that–given a choice–people with disabilities
are likely to pursue self-employment as an alternative to wage employment.
Self-employment outcomes within the vocational rehabilitation
system vary from state to state. Nancy Arnold, Tom Seekins, and Craig Ravesloot
studied the rates of self-employment in all fifty states. They found that, in
1988, self-employment rates among VR clients ranged from .53 per cent
(California) to 7.34 per cent (Alaska). Their findings further indicated that
self-employment outcomes were more likely to occur in rural than in urban
states.
Barriers to Business Ownership
Several barriers discourage potential entrepreneurs with
disabilities from pursuing business ownership:
- Business development resources are frequently inaccessible to
people with disabilities. Reference materials and training programs are rarely
adapted into formats that are accessible to people with sensory and learning
disabilities. Few business development programs (public or private) address the
need to reach out to people with disabilities. Services are typically provided
at the convenience of the service provider, making it difficult for those with
mobility and/or transportation limitations to access services.
- Low- or no-cost technical assistance is not as widely available
in rural areas as it is in urban and suburban areas. Financial constraints make
it difficult for many people with disabilities to afford the level of technical
assistance they need to launch their business ideas.
- The business planning process is perceived by many to be a
series of unnecessary hoops designed by bureaucrats and business development
professionals to discourage people from starting their own businesses. Business
planning, however, does not need to be complicated. It should actually simplify
the start-up process by helping the entrepreneur logically organize and keep
track of information that would otherwise be confounding.
- Fear of losing means-tested assistance such as cash benefits,
housing assistance, and publicly funded health insurance discourages many
people with disabilities from actively pursuing self-employment and other
income-generating activity. For many, earned income actually results in a net
loss when reductions in public assistance are factored in.
- Low expectations regarding the self-employment potential of
people with disabilities discourage entrepreneurship. Just like everyone else,
individuals with disabilities are susceptible to common myths and stereotypes
about the abilities of people with disabilities. This low ceiling of
expectations often squelches entrepreneurial thinking.
Making the Dream a Reality
Consistent with the rise in self-employment outcomes for other
disadvantaged populations, people with disabilities are beginning to understand
that, for many, self-employment provides flexibility and income opportunities
unavailable through traditional wage employment. The opportunity to meet an
identified market need in an industry that is well matched to a person's skills
and interests can be an attractive ticket to economic independence for people
with disabilities.
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