Entrepreneurship as a Solution for Formerly Incarcerated Individuals
Entrepreneurship has long been seen as a path to success for those with a drive to create their own opportunities. While some individuals are drawn to entrepreneurship due to their natural fit for the lifestyle or their personality, others have a very different reason for setting off on their own—they couldn’t find any other employment.
According to Hwang, an assistant professor of management and organizations at the Kellogg School, the stigma of a criminal record or incarceration is pervasive in the United States. This stigma leads to high levels of labor-market discrimination, particularly against Black individuals. As a result, entrepreneurship becomes one of the few viable options for those facing this discrimination to build a rewarding career in the U.S.
In a groundbreaking study conducted by Hwang and her coauthor, Damon Phillips of the Wharton School at the University of Pennsylvania, the researchers set out to explore the relationship between incarceration and entrepreneurship. They aimed to understand the extent to which labor-market discrimination pushes individuals with a history of incarceration into entrepreneurship and whether it is a beneficial option for them.
The study revealed that formerly incarcerated individuals are 40 percent more likely than their peers with no history of incarceration to pursue entrepreneurship. Furthermore, these entrepreneurs tend to earn higher incomes and are less likely to experience recidivism compared to those who work for companies.
However, the researchers also found that in areas with less labor-market discrimination against individuals with a criminal record, entrepreneurship is significantly less popular, especially among Black individuals. This highlights the fact that the lack of employment opportunities is a driving force behind the decision to pursue entrepreneurship for formerly incarcerated individuals.
The study by Hwang and Phillips sheds light on how entrepreneurship serves as a response to discrimination in the labor market for the formerly incarcerated. While previous research has focused on individual characteristics leading to entrepreneurship, this study delves into the systemic barriers that push individuals with a history of incarceration into entrepreneurship.
The researchers utilized data from the U.S. National Longitudinal Survey of Youth 1997 and information on “ban-the-box” policies, which restrict employers from asking about criminal history until later stages in the hiring process. The analysis revealed that formerly incarcerated individuals are more likely to become entrepreneurs than those without a history of incarceration, even when controlling for demographic factors.
Despite the benefits of entrepreneurship for formerly incarcerated individuals, the researchers found that the lack of employment opportunities is a significant factor driving individuals into entrepreneurship. In areas with ban-the-box policies, where employment is more accessible for those with a criminal record, entrepreneurship is less popular. This underscores the need for policies that improve employment options and reduce discrimination for this group.
Hwang’s research aims to address the challenges faced by individuals reentering society after incarceration. She advocates for resources to support the entrepreneurial success of formerly incarcerated individuals, such as financial backing and additional education. Additionally, efforts should be made to reduce discrimination and expand opportunities for gainful and fulfilling employment for this population.
With millions of Americans currently imprisoned, the issue of reentry and successful integration into society remains a pressing concern. By understanding the role of entrepreneurship as a response to labor-market discrimination, policymakers and stakeholders can work towards creating a more inclusive and supportive environment for formerly incarcerated individuals to thrive.
