Women-Owned Businesses: Hurdles and Thrives



In recent years, the growth of Women-Owned Businesses (WOBs) has been one of the main observed trends in the U.S. labor market (Coleman, 2007; Jiang et al., 2012; Cantwell, 2014; U.S. Chamber of Commerce Foundation, 2014; American Express OPEN, 2018). Indeed, available estimates indicate that the number of women-owned businesses increased by 31 times between 1972 and 2018, rising from 402,000 (4.6% of all firms) in 1972 to 12.3 million (40% of all firms) in 2018. Today, it is estimated that WOBs employ nearly 9.2 million individuals and generate over US$1.8 trillion dollars in revenues (American Express, 2018). 


Despite these remarkable trends, WOBs still face many hurdles and disadvantages. In particular, WOBs are less productive and employ less paid workers than the average business (Office of Advocacy U.S. Small Business Administration, 2011). For instance, available data from the U.S. 2017 Economic Census for the 15 largest national business districts (proxied as those metropolitan areas with the highest sales / receipts registered in year 2017), indicate that the average business is up to 3 times more productive than the average WOBs, as measured by their gross receipts by paid employee (a proxy of output per worker). [1]   

[1] See Figure 1.


Figure 1:

Yearly Sales/Receipts per Paid Employee (in US$x1000) in the 15 Largest Business Districts 


* Source: EVALU-IT’s calculations using data from the U.S. Economic Census.


There are my reasons that explain this phenomenon. First, WOBs are more likely to be very small (i.e., to employ less than five individuals) and to operate in sectors of the economy that are less productive or display lower levels of growth (Loscocco and Robinson, 1991; Mayer, 2008). For instance, WOB are more likely to operate in the retail and service sectors than in the high-tech and communications sectors (Mayer, 2008; Langowitz, 2003). This trend holds true in the 15 largest U.S. metropolitan business districts, where data indicate that WOBs are highly concentrated in the tertiary sector (notably in health and education) and less concentrated in the primary and secondary sectors (e.g., transport, construction, manufacturing, among others) [2].   

[2] See Figure 2. 


Figure 2:

Business Ownership by Economic Sector in the 15 Largest Business Districts (NAICS, Sector Level 1) 


* Source: EVALU-IT’s calculations using data from the U.S. Economic Census.


Disparities in the concentration of women participation in some sectors of the economy has been traditionally known as occupational segmentation – a feature that has long been assessed as prevalent in the U.S. labor market (Blau and Hendricks, 1979; Albelda, 1986; Blau, 1989; Blackburn et al., 1993; Charles and Grusky, 1995; Mayer, 2007). 


Addressing gender gaps in occupational segmentation could contribute to higher levels of economic growth if the female workforce (employees and business owners) moves from lower to higher productivity sectors. As such, occupational segmentation has been a concern for policymakers (Hegewisch et al., 2010). Also, reducing occupational gender segmentation could reduce the observed wage gaps between men and women as well as observed productivity gaps between WOBs vs. non-WOBs (Blau and Khan, 2006 and 2007; and Hegewisch et al., 2010).  


Most of the early literature in this field focused on measuring the levels of occupational segmentation of wage earners in different sectors and occupations within the U.S. economy (Blau and Hendricks, 1979; Albelda, 1986; King, 1992). Indeed, most recent literature has focused on two additional areas: (i) documenting trends in occupation segmentation (Blackburn et al., 1993; Hegewisch et al., 2010); and (ii) assessing the relationship between gender occupational segmentation and the gender wage gap (England, 2015; Blau and Khan, 2006 and 2007). However, less research has been conducted assessing segmentation in the context of small businesses or self-employment. 


Reducing the gaps in occupational gender segmentation has not been an easy/quick process. Despite visible improvements in the reduction of gender segmentation in some high-pay occupations such as medicine, law, and dentistry; some less-paid occupations such as nursing, teaching, and care; remain dominated by female-workers (Hegewisch et al., 2010). This translates into a higher share of WOBs operating in these, relatively, less productive/profitable sectors. 




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