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Women Entrepreneurs’ Role In Job Creation And Economic Growth

Women

Job creation is a key indicator of the importance of women’s leadership for economic growth.

By Stephanie Sheridan (Founder & Policy Coordinator, Institute for Policy Analysis & Implementation)

Women not only make the majority of purchasing in the United States, we account for the majority of new ownership positions in the corporate world. Whereas we tends to focus on a lack of female leadership in the Fortune 500 league, these stats fail to give justice to the radical revolution taking place in the largest part of the economy – SMEs.

Women have set a fast and furious pace in founding our own companies and our market share is growing at a faster rate than our counterparts. Inasmuch as women say a decisive “no” to the C-suite in Fortune 500 (59% of women responded they do not aspire to the highest echelons of corporate leadership in their large corporations, McKinsey), we are saying “yes” to building our own equity.

According to a study conducted by the U.S. Department of Commerce for the White House Council on Women and Girls, the number of women-owned companies increased by twice that of our male counterparts between 1997 and 2007, adding half a million jobs while other firms bore the recession and shed jobs.

Job creation is a key indicator of the importance of women’s leadership for economic growth. When we combine job creation, incorporation and sales growth rates with the fact that women receive dramatically less financing and funding for our companies, the story of an undervalued marketplace becomes clear.

As a trained economist with a background in emerging markets, I feel like I have a lot of explaining to do to people who see my company is headquartered in Washington, DC and focused on the U.S. consumer. Inasmuch as I worked and studied in emerging markets for the last ten years, understanding their value from a very young age, so too I see women’s equity in the U.S. economy, as an emerging and undervalued market.

Now, let’s dissect our progress. As of 2007, women owned 30% of privately-held businesses. The sales receipts of these companies, however were one-third of this, only 11% of all sales, and contributed to 13% of employment.

A rough statistic to handle: women-owned business sales account for 25% that of their male counterparts, this is definitely worth dissecting. That being said, the growth of receipts is increasing at a much faster rate in our firms than our male counterparts.

So, what metrics should we focus our achievements? With regard to market share, we have to close the market gap for sales to more fully reflect that of our ownership: ownership to sales ratios need to be more balanced. As of 2007, the ratios were 30:11. For men the ratios are flipped at 53:77. To this end, 3.7% of women-owned firms grossed above 500,000 in sales. This compares to over 11% for men.

However, women are learning the ropes and outgrowing our male counterparts. While sales are still not where they need to be, growth is increasing. Over 10 years of significant growth in incorporation, female-owned businesses grew 46% as compared to 28% for men-owned businesses.

This economic growth resulted in job creation by women owned companies of more than 500,000 jobs in a time of overall declining employment. This means that investing in woman-owned companies makes both economic sense but impact sense. Women-owned companies are gaining share and creating jobs. We are innovating.

The rapid growth of women incorporating should come as no surprise. As aptly pointed out by McKinsey in recent research, women leadership in Fortune 500 companies is stalled at two to three percent. Women have found another way to show leadership on their own term. We can see from the figures above that one way to interpret these figures is that they are good for SME’s, job creation and women’s equity. Women find a way, we always find a way.

Editor’s note: Got a question for our guest blogger? Leave a message in the comments below.

About the guest blogger: Stephanie Sheridan is the Founder and Policy Coordinator at Institute for Policy Analysis & Implementation (IPAI), based in Washington DC. Stephanie is a trained economist who has had a long-time love affair with quantitative methods, with a Masters from Johns Hopkins School of Advanced International Studies and a Bachelor of Arts from Eckerd College. Stephanie’s previous work at a startup compelled her to found IPAI and pursue her focus on meeting individuals’ needs in The Green Economy. Follow her on Twitter at @S_Sheridan.