A new study finds that female entrepreneurs pay themselves less than male entrepreneurs. But once they get more experience under their belt, women give themselves bigger raises.
By Betsy Mikel (Contributing Writer, Women 2.0)
Are female business owners not cutting themselves big enough checks? A new study reveals a significant wage gap in what male and female entrepreneurs pay themselves. But, just like any study or research, the results are not black and white.
Let’s start with the facts.
A new study from Babson College surveyed 1,300 graduates of Goldman Sachs 10,000 Small Businesses program. At the beginning of the program, female entrepreneurs paid themselves less than the men paid themselves — their self-determined salaries were about 20% less. This closely mirrors what women are getting paid by their employers. The Institute for Women’s Policy Research reports that women’s median weekly wages for full-time work were 81% of men’s in 2012.
What did the authors of the study have to say about these results?
“I’m not sure if it’s benchmarking against salaried women, I’m not sure if it’s a lack of confidence, I’m not sure if it’s negotiating themselves down first,” Babson professor Patricia Greene told the New York Times. “Sometimes women have a tendency to say: ‘I couldn’t possibly ask that. I’d better recalibrate that before I put that number out there.’”
Ariane Hegewisch, a study director at the Institute for Women’s Policy Research told New York Times that one reason could be that women tend to start businesses with lower revenue than men do. That’s an argument we’ve heard before regarding the disparity in venture capital given to men and women. Forbes has said the real reason women aren’t receiving venture capital is because “men often start businesses with the intention of achieving some semblance of world domination while women are often starting ‘side hustles’ and one-woman operations.”
But the study results weren’t entirely doom and gloom. As women moved through the program, the income gap shrank. When the researchers followed up with business owners six months after finishing the Goldman program, women had narrowed the salary gap to 8%. All graduates (both women and men) had given themselves raises, but women had given themselves even bigger raises.
The National Review suggests that the program had helped women and that paying themselves better could demonstrate fiscal health to investors and gave women more insight into what the real “going rate” was for their time.
Greene, the study’s author, also attributed the instruction of the Goldman program to helping narrow that gap.
“We’re very interested that business owners pay themselves a salary, because part of growing is being able to support yourself,” Green told the New York Times. “And also if they ever want to get financing, they need to demonstrate that they can pay themselves a livable wage.”
Women also tend to be more risk-averse than men, which might explain why they keep money in the business longer, then take out more for themselves later once the business stabilizes.
Do you think women are overpaying themselves?
Betsy Mikel is a freelance copywriter and content strategist who helps brands, businesses and entrepreneurs tell their stories. A journalist at heart, her curiosity drives her to find something new to learn every single day. Follow her on Twitter at @betsym.