October 23, 2009

There’s a tendency for policy makers and the media to argue that entrepreneurship is growing among women.  In fact, many publications present data that compares the numbers of women business owners or self-employed over time to show that the numbers are on the rise. 

Take, for example, how the Office of Advocacy of the U.S. Small Business Administration presents data on self-employment among women in its 2009 Small Business Economy publication (link).  The chart shows the number of male and female self-employed in 2000 and 2007 and the percentage change in the number for each between the two years.  The number for the women is up, suggesting that female self-employment is rising. 

But this way of looking at the data is deceptive because the labor force is growing as the U.S. population increases.  So as long as self-employment among women doesn’t completely tank, we should see an increase in the absolute number of self-employed women over time.

The data in the table provide a clue that women aren’t becoming more likely to be self-employed.  From 2000-2007, the SBA data show that the number of male self-employed grew faster than the number of female self-employed (17.3 percent versus 9.7 percent).  So if you do the math and look at the female share of self-employed, you can see that it fell from 34.8 percent of the total to 33.3 percent in 2007.

The data show that men are twice as likely as women to go into business for themselves – a ratio has barely budged since the early 1990s.  In 1993, the year after the government made a major revision to the sampling process for the Current Population Survey (its major tool for measuring self-employment), women made up 34.1 percent of the self-employed population.  Fourteen years later, they made up 33.3 percent.  During that period, they reached a high of 34.8 percent in 2000 and a low of 33.2 percent in 2005. 

Why look at the female share of self-employed?  Because it tells us whether there’s something holding women back from becoming entrepreneurs.  If nothing makes the odds of men and women being self-employed different, then half of the self-employed people should be women and half should be men.

Therefore, something keeps women from being entrepreneurs at the same rate as men.  If we want women to be as likely as men to be entrepreneurs, we need to figure out what that something is.  Are there barriers, like discrimination, that keep women from going into business for themselves?  Or are women less interested than men in being self-employed for some reason? 

Policy makers should figure out what’s going on. Presenting data in a way that says “the number of female self-employed grew 9.7 percent since 2000” obscures important differences between male and female entrepreneurs that we need to understand. 

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About the Author:  Scott Shane is A. Malachi Mixon III, Professor of Entrepreneurial Studies at Case Western Reserve University. He is the author of nine books, including Fool’s Gold: The Truth Behind Angel Investing in America; Illusions of Entrepreneurship: The Costly Myths that Entrepreneurs, Investors, and Policy Makers Live By; Finding Fertile Ground: Identifying Extraordinary Opportunities for New Ventures; Technology Strategy for Managers and Entrepreneurs; and From Ice Cream to the Internet: Using Franchising to Drive the Growth and Profits of Your Company. 

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