Census Data Provide a Mixed Message on Women Entrepreneurs
How are female entrepreneurs doing these days?
Recently released preliminary data from the 2012 Survey of Business Owners – the Census Bureau’s effort to take stock of American companies every five years – show that the fraction of businesses owned by women improved substantially over the past five years.
However, behind this silver lining is a dark cloud: Women still lag behind men in business ownership. And female business ownership appears to be growing fastest among businesses without employees, which have less economic impact than other companies.
Let’s start with the best news. Between 2007 and 2012, women-owned businesses increased from 28.7 percent of companies to 36 percent. That’s a healthy acceleration over the previous five years; women-owned businesses inched up from 28.2 percent of U.S. companies in 2002 to 28.7 percent in 2007.
The news on business receipts is more mixed. While the share of sales going to women-owned businesses rose over the past five years, after having declined over the previous half decade, the actual fraction remains small. In 2002, women-owned companies accounted for 4.2 percent of the sales of U.S. businesses. In 2007, the number was down to 3.9 percent. In 2012, it was back up, but to just 5 percent of the sales of U.S. companies.
Also mixed is the news on employer firms. Women-owned companies now make up a larger share of companies with paid employees than they did five years ago. However, their fraction remains well below the share of women in the economy. In 2002, 16.6 percent of companies with paid employees had women owners. That slice had declined to 15.8 percent in 2007, but was back up to 19.4 percent in 2012.
Women-owned businesses account for a greater share of this country’s employment and payrolls than they did in 2007, but the numbers remain small. While companies owned by women generated 6.4 percent of employment in both 2002 and 2007, they accounted for 7.8 percent in 2012. The share of payroll belonging to female-led businesses changed from 4.6 percent in 2002 to 4.5 percent in 2007 to 5.5 percent in 2012.
A similar pattern can be seen for the revenues of women-owned businesses with employees. After having declined from 3.7 percent in 2002 to 3.5 percent in 2007, the fraction rebounded to 4.2 percent in 2012. This, of course, is a better figure than five years earlier, though it remains very small.
Women business owners have made greater strides toward equality in ownership of companies without employees. Women account for a higher fraction of businesses without employees (40 percent) than those with employees (36 percent). Moreover, the rate of growth in the fraction of non-employers (28.2 percent) run by women has been higher than the rate of increase in their share of non-employers (23 percent) over the past five years. Specifically, the percentage of women-owned non-employers was 31.9 percent in 2002, dipped to 31.2 percent in 2007, and then rose to 40 percent in 2012.
Women owned non-employers are also improving their sales. The percentage of sales of female-led non-employer businesses was 17.8 percent in 2002, 18.7 percent in 2007 and 22 percent in 2012.
The rise of the numbers for women-owned businesses over the past five years is cause for cheer among those who would like to see more equality of business ownership, particularly given the stagnant numbers or declines over the previous half decade.
But the numbers remain troubling. Not only are the figures for women-owned companies very low, relative to the female fraction of the labor force, but also the growth of women’s business ownership seems to be greatest among non-employer businesses, which have little economic impact. The average revenue of a non-employer business in the United States was only $47,000 in 2012, and these businesses accounted for only 3.2 percent of U.S. sales in that year. And, by definition, non-employers do not employ others.
Scott Shane is the A. Malachi Mixon III professor of entrepreneurial studies at Case Western Reserve University. His books include Illusions of Entrepreneurship: The Costly Myths That Entrepreneurs, Investors, and Policy Makers Live by (Yale University Press, 2008) and Finding Fertile Ground: Identifying Extraordinary Opportunities for New Businesses (Pearson Prentice Hall, 2005).