Jan 13, 2022
Tackling racial wealth gap could unlock major economic gains: RBC
Supporting visible minority Canadians will foster strong business innovation: RBC's Billy-Ochieng'
A new report from Royal Bank of Canada shows that encouraging ownership of investment vehicles and businesses among visible-minority Canadians could help lead to increased innovation and competitiveness on the global stage.
While many Canadians gained wealth during the COVID-19 pandemic, the report highlights that financial gains among visible minorities have been much less significant. As COVID-related government income supports wind down, that wealth disparity could worsen, the report found.
RBC points out that visible minorities represent about one-fifth of Canada’s population, but only account for 13 per cent of private business owners.
“If visible minorities owned businesses at a rate comparable to the overall population, more than 100,000 new businesses would be created, each with the potential to hire between eight and 10 workers,” according to Rannella Billy-Ochieng', an economist with RBC Economics, in a report released on Thursday. “Breaking this pattern would benefit the economy as a whole.”
In addition to a pre-existing financing gap that visible-minority business owners face, she said labour shortages and rising input costs are presenting extra challenges.
Enhancing financial support for those business owners and encouraging more visible minorities to become entrepreneurs could lead to a stronger economy overall.
“A Statistics Canada survey showed that visible minority businesses owners were more likely to innovate, enhancing Canada’s global competitiveness,” Billy-Ochieng' said.
“And leading innovative businesses have been shown to grow at a rate 16 per cent above the least innovative, delivering additional revenue of $250 million over three years.”
Dennis Mitchell, chief executive officer of Starlight Capital and co-founder of the Black Opportunity Fund, said the report’s findings aren’t surprising to him as a Black Canadian.
“Imagine a world where Bill Gates, Steve Jobs and Jeff Bezos were steered away from careers in technology because they were straight, white men. The loss to society would be borne by men and women of all races, ethnicities, religions, etc., not just straight, white men in the U.S.,” he said in a statement to BNN Bloomberg on Thursday.
He added that harnessing the power of the entire population would lead to “benefits [that] accrue to everyone globally, and that is why everyone has a vested interest in addressing the concerning findings of the RBC report.”
Another area of concern that Billy-Ochieng' said would need to be addressed to narrow the racial wealth gap is homeownership levels among visible minorities.
“This isn’t a new issue. For decades, visible minorities have had fewer vehicles with which to build wealth. They are less likely to own financial assets or businesses. And critically, they are less likely to own homes,” Billy-Ochieng' said.
Homeownership has helped many Canadians in terms of building wealth, with home equity accounting for about 40 per cent of total national household net worth, according to RBC.
“Had visible minorities owned homes at similar rate to white Canadians during the pandemic, their collective net wealth would be $100 billion higher,” she said.