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Opportunity Awaits: Native Americans and Entrepreneurship

Kauffman researcher Emily Fetsch shares the first of a four part series on Native American entrepreneurship.

The first blog post of a series on Native American entrepreneurship: the background, the challenges, and the potential solutions. This first blog post examines the current state of entrepreneurship among Native Americans.

In the United States, Native American reservations continue to be a place of stagnated economic growth for a variety of reasons including systemic poverty, unemployment, and lack of educational attainment. Because entrepreneurship is a key component to economic growth, promoting entrepreneurship among Native Americans, especially those living on reservations, can contribute to greater economic prosperity and job security.

Photo courtesy of Ron Cogswell via Flickr

According to the 2010 U.S. Census, there are more than 334 federally recognized reservations, 565 tribes, and 5.2 million Native Americans in the United States. Every reservation, tribe, and individual Native American, is unique. However, there are broad challenges that affect many Native Americans and their ability to successfully engage in entrepreneurship.

Native Americans, as a whole, are nearly twice as likely to live in poverty as Americans overall (28 percent vs. 15 percent). Related, they are also more likely to be unemployed. Like all other racial minority groups, they are also less likely to be entrepreneurs than Americans overall. While 10 percent of all American workers own a business, only 7.6 percent of the Native Americans workforce owns a business.

Among Native Americans who do own a business, they are less likely to have employees and gross receipts. In 2007, Native American business owners averaged less than one employee per firm (0.8), while their non-minority firm counterparts had three times the employee rate with a mean number of paid employees of 2.5. In 2002, Native Americans “had average gross receipts of $133,439, about 30 percent of the average receipts of non-minority firms.”

However, among the employees hired by Native American business owners, payroll remains competitive with the average employee in 2007 earning $32,048 compared to $35,005 for their non-minority counterparts.

Why does it matter that Native Americans are underrepresented as entrepreneurs and business owners? One reason is that business owners control a large amount of wealth in the country. Business owners “represent roughly 10 percent of the workforce, but hold nearly 40 percent of the total U.S. wealth.” In 2010, the median wealth of Native Americans “was equal to only 8.7 percent of the median wealth among all Americans.” For a community with unrepresentative lack of wealth, increasing business ownership has the possibility to help close the racial wealth gap.  

Promoting entrepreneurship among the Native American community will contribute to economic growth among individual Native Americans, reservations, and the total American economy. In addition, Native American entrepreneurship can help establish economic independence on reservations. Finally, having entrepreneurial diversity strengthens the entrepreneurial landscape and the diversity of ideas.

Native American entrepreneurs face a number of unique challenges that need to be addressed to cultivate a healthy Native American entrepreneurship community. These challenges include geography, lack of capital and education, and limited networks. These long-standing hurdles will be discussed in more detail in the next blog post of this multi-part series.