Progress underway in narrowing native American income gap – Commemorating native American heritage month

Summary

As we noted in previous reports in commemoration of Native American Heritage Month, the labor market attributes of the indigenous community are generally not as robust as those enjoyed by other Americans. Consequently, household income in the Native American community lags the national median.

Although there may be numerous factors that depress household income of Native Americans, we focus on three causes in this report: geographical isolation, educational attainment and capital availability.

Census Bureau data show that roughly 27% of the Native American population lives in non-urban areas whereas the comparable ratio for the overall U.S. population is 19%. Because average personal income in rural America is lower than in urban areas, the over-representation of Native Americans in rural areas pulls down income, everything else equal. Policies aimed at strengthening the labor market environment for all rural Americans would help to close the income gap between indigenous households and the national average.

Graduation rates among Native American students from high school and college are lower than comparable rates for non-indigenous students. Relatively poor internet access and a shortage of qualified teachers can negatively affect the ability of indigenous students to receive a proper education.

Scarcity of capital constrains business formation among Native-owned firms, which can be an important source of employment opportunities for indigenous people. Native American business owners tend to have lower credit scores than their non-indigenous counterparts, and the geographical isolation of many reservations means that there is a relative lack of financial institutions in Indian country. Additionally, most land on reservations is held in trust, depriving many Native-owned businesses of an important source of collateral.

The federal government has recognized the problem that these issues pose for household income in the indigenous community, and it is taking steps to rectify them via more resources. The Inflation Reduction Act of 2022 provided loans and grants to promote clean energy development in rural America, and a number of programs have been established to help close the digital divide between Indian country and the rest of the nation. Efforts are underway in the public, private and philanthropic sectors to make capital more available to Native-owned businesses.

These are all steps in the right direction. But policymakers will need to remain focused on the issue of below-average income in the Native American community and remain committed to reducing the income gap in years to come.

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