California’s Latino workforce booms, yet opportunities for business ownership are limited | Opinion

Gov. Gavin Newsom proudly likes to highlight California’s trajectory toward becoming the world’s fourth-largest economy, surpassing Germany. This remarkable ascent owes much to thriving business ventures from Silicon Valley, Hollywood and the state’s robust agricultural industry, with an increasingly significant contribution from the Latino workforce.

Yet, despite the workforce being predominantly Latino, a glaring disparity exists: disproportionately few of these businesses are owned by Latinos. This disheartening reality underscores the limited opportunities for Latino entrepreneurs throughout the state.

The consequences of this inequity extend beyond the individual level. It has great potential to stifle California’s economic prowess. Our elected leaders must urgently prioritize the growth of Latino-owned businesses in the years ahead.

Opinion

For nearly a decade, Latinos have been the largest ethnic group in California, with their age skewing significantly younger relative to the state average. Projections consistently show that California’s young Latino population will continue to grow well into the next several decades. Simply put, California’s productivity will increasingly rely on the economic contributions and well-being of Latinos.

New research from the UCLA Latino Policy & Politics Institute found that there are over 730,000 million employer businesses in California. Latinos own approximately 85,000 of those businesses — only 11%, despite Latinos constituting 40% of the workforce and 39% of the state’s overall population.

In stark contrast, white Californians represent 38% of the workforce yet own 60% of businesses with over 458,000 firms statewide.

This disparity is not confined to business ownership rates. It also extends to financial performance. Latino-owned businesses in the state typically generate lower revenues, which leads to lower wages and a smaller workforce compared to white-owned counterparts.

Public officials must keep all of these facts in mind as they take actions to address systemic barriers faced by entrepreneurs of color in California.

Legislators recently awarded California State Fullerton’s Center for Entrepreneurship a two-year state grant to further the center’s mission to educate and inspire innovators with a social impact focus. Cal State Fullerton is an ideal location for this type of state spending, with Latinos accounting for half of the student body. Yet the grant was only $500,000 in its first year — enough to power only a few micro-businesses.

Three years ago, the California Legislature also approved the Social Entrepreneurs for Economic Development (SEED) Initiative to support the entrepreneurship of immigrants and limited English proficient individuals. However, in the 2021-2022 fiscal year, the program only received 57 applicants. While programs like SEED are a step in the right direction, the state must invest more resources and spending into loans, incubators and education programs to ensure that a higher number of potential entrepreneurs of color can reach their full potential.

Through institutions like the Governor’s Office of Business and Economic Development and the California Office of the Small Business Advocate, the state could and should direct more resources to programs that focus on providing financial support and access to capital and entrepreneurship education tailored to communities of color. Should policymakers not take urgent action, disparities in Latino business ownership may widen, ultimately hurting the state’s economy.

Newsom underscored the need for such investment in 2021 when he referenced Latino businesses in the context of a post-COVID world.

“We need each and every one of you to come back stronger because when Latinos succeed, our state truly does flourish,” he said.

Today, California falls short of achieving its true economic potential due to the state of Latino businesses. But by investing further in Latino entrepreneurs, California has the opportunity to unleash innovation, create more jobs and boost economic growth.

Jose Garcia is an analyst with the UCLA Latino Policy and Politics Institute. His focus areas include inequality and economic development.