The Role of Women Business Ownership in the U.S. Economy A Presentation to OWBO Conference Ying Lowrey, Ph.D. [email protected] September 19, 2011.

The Role of Women Business The Role of Women Business Ownership in the U.S. EconomyOwnership in the U.S. Economy

A Presentation to OWBO ConferenceA Presentation to OWBO Conference

Ying Lowrey, Ph.D.Ying Lowrey, [email protected]@gmail.com

September 19, 2011 at the Washington Plaza HotelSeptember 19, 2011 at the Washington Plaza Hotel

OutlineOutline

• Supporting small business including women-owned business was mandated by Congress

• Pervasiveness of business ownership is the key to improving people’s economic wellbeing

• Business creation is job creation• Economic growth did not increase the median

household income• Income disparity between large vs. small businesses

is the reason for the erosion of business ownership

Small Business ActSmall Business Act

• Promulgated in July 1953 • “The essence of the American economic system of

private enterprise is free competition.”• “The preservation and expansion of such competition

is basic not only to the economic well-being but to the security of this Nation.”

• “Such security and well-being cannot be realized unless the actual and potential capacity of small business is encouraged and developed.”

Women's Business Ownership ActWomen's Business Ownership Act

• Established in 1988• “Women owned business has become a major contributor to the

American economy by providing goods and services, revenues, and jobs.”

• “Over the past two decades there have been substantial gains in the social and economic status of women as they have sought economic equality and independence.”

• “Despite such progress, women, as a group, are subjected to discrimination in entrepreneurial endeavors due to their gender.”

• “It is in the national interest to expeditiously remove discriminatory barriers to the creation and development of small business concerns owned and controlled by women.”

Owning a Business Doubles (or 8 Times) the Owning a Business Doubles (or 8 Times) the Probability of Being High Income (or High Probability of Being High Income (or High

Net Wealth) HouseholdNet Wealth) Household

1998 2007

Characteristics N High Income

High Wealth N High

IncomeHigh

Wealth

All respondents 4,305 0.263 0.033 4,418 0.310 0.060

No business ownership 3,028 0.230 0.017 3,001 0.263 0.030

Any business ownership 1,277 0.486 0.144 1,417 0.605 0.254

Small business 1,098 0.476 0.134 1,183 0.589 0.237

Single business only 682 0.471 0.093 721 0.550 0.167

Multiple businesses 416 0.497 0.301 462 0.763 0.550

Business Density (Business Number per Business Density (Business Number per 1,000 People) and Median Household 1,000 People) and Median Household

Income, by Race/EthnicityIncome, by Race/Ethnicity

Race/Race/EthnicityEthnicity

2002 2007

Business Business DensityDensity

Median Median Household Household

IncomeIncome

Business Business DensityDensity

Median Median Household Household

IncomeIncome

All PeopleAll People 8080 $43,527$43,527 9090 $52,163$52,163 Non-Hispanic WhiteNon-Hispanic White 8686 $47,957$47,957 101101 $57,030$57,030

African AmericanAfrican American 3333 $29,987$29,987 5252 $35,219$35,219

HispanicHispanic 4040 $33,913$33,913 5050 $40,165$40,165 AsianAsian 9595 $55,089$55,089 118118 $68,643$68,643

US-2007

AL

AK

AZ

AR

CA

CO

CT

DE

DC

FL

GA

HI

ID

IL

IN

IA

KS

KY

LA

ME

MD

MA

MI

MN

MS

MO

MT

NE

NV

NH

NJ

NM

NY

NC

NDOH

OK

ORPA

RI

SCSD

TN

TX

UT

VT

VA

WA

WV

WI

WY

us-2002

al

ak

az

ar

caco

ct

de

dc

fl

ga

hi

id

ilin ia

ks

ky

la

me

md

ma

mi

mn

ms

mo

mt

nenv

nhnj

nm

ny

ncnd

oh

ok

orpa

ri

scsd

tn

tx

ut

vt

va

wa

wv

wi

wy

25,000

30,000

35,000

40,000

45,000

50,000

55,000

60,000

65,000

70,000

15 17 19 21 23 25 27 29 31 33 35

Median household income

Women business density

Trendline: states with higher women business density tend to have higher median household income. Also, there is an upward movement of both women business density and the median household income in each state from

This chart consists of 102 data points of 50 United States and

District of Columbia. Lower cases represent 2002 data and capital

cases represent 2007 data.

WBD has stronger explanatory power for WBD has stronger explanatory power for median household income, 1997, 2002, and 2007median household income, 1997, 2002, and 2007

Y = 269x + 20327R² = 0.16

25

30

35

40

45

50

55

60

65

70

60 70 80 90 100 110 120 130

Thousands BD & HHICM

Y = 1295x + 13831R² = 0.35

25

30

35

40

45

50

55

60

65

70

13 18 23 28 33

Thousands WBD & HHICM

Business Creation is Job CreationBusiness Creation is Job CreationNearly 6 million jobs created by new startups in 2007; over 34% created by women-owned firms; 10% were

employment jobs and 90% were entrepreneurial jobs.

Numbers from 2007 SBO Data

Nonemployer Firms

Employer Firms

2007 Total Job Creation

Total Firms 21,357,346 5,735,562 5,879,260Startup Firms 2,776,455 189,274 586,551Startup Entrepreneurs 3,859,272 433,436 4,292,709Women-Owned Firms 6,882,603 910,761 2,012,276Women Startup Firms 1,073,686 38,252 45,121Women Startup Entrepreneurs 1,814,529 152,625 1,967,155

Business Business Density Has Density Has Expanded Expanded Since 1997 Since 1997

for All for All Businesses Businesses

and and Women-Women-Owned Owned

BusinessesBusinesses Year BD WBDYear BD WBD

1997 76 201997 76 202002 80 232002 80 232007 90 262007 90 26

4

9

14

19

24

29

34US

1-CT 1-MA1-ME

1-NH1-RI

1-VT

2-NJ

2-NY

3-DC

3-DE

3-MD

3-PA

3-VA

3-WV

4-AL

4-FL

4-GA

4-KY

4-MS

4-NC4-SC

4-TN5-IL

5-IN5-MI5-MN

5-OH5-WI6-AR

6-LA6-NM

6-OK

6-TX

7-IA

7-KS

7-MO

7-NE

8-CO

8-MT

8-ND

8-SD

8-UT

8-WY

9-AZ

9-CA

9-HI9-NV

10-AK10-ID

10-OR10-WA

2007 WBD 2002 WBD 1997 WBD

Ten States had Negative Growth Rate of Real Ten States had Negative Growth Rate of Real Median Household Income for 1997-2007 Median Household Income for 1997-2007

Despite High GSP GrowthDespite High GSP Growth

Code of region-state

State nameGrowth rate of real

HH-income (1997-2007)

Growth rate of real GSP

(1997-2007)

Poverty rate in 2007

(%)

Publicly held BD (2002)

U.S. National Average 5.4 20.2 13.3 17.25-MI Michigan -1.1 22.8 13.7 18.05-IL Illinois -1.3 18.3 12.1 19.93-DE Delaware -1.5 25.7 10.6 54.72-NJ New Jersey -2.2 17.3 8.7 21.97-MO Missouri -2.3 25.1 13.4 21.38-UT Utah -2.8 28.4 10.3 25.86-LA Louisiana -3.6 19.5 19.3 19.05-IN Indiana -5.3 27.9 12.5 18.24-NC North Carolina -5.7 38.4 14.8 18.64-KY Kentucky -8.4 12.8 17.1 18.0

Both number and receipts of publicly-held firms Both number and receipts of publicly-held firms consistently increased since 1997; the receipt of consistently increased since 1997; the receipt of

privately-owned firms consistently decreasedprivately-owned firms consistently decreased

1.8%

2.2%

3.0%

54.8%

61.1%

63.6%

17.5%

11.7%

17.0%

5.1%

3.2%

4.2%

54.6%

57.4%

51.3%

35.8%

31.2%

28.2%

26.0%

28.2%

28.7%

4.4%

4.2%

3.9%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

1997

2002

2007

1997

2002

2007

Firm

s num

ber

Rece

ipts

val

ue

Publicly held** Equally-owned* Male-owned Female-owned

Number of U.S. firms and business receipts, 2007: Number of U.S. firms and business receipts, 2007: 3% of total firms were publicly-held but had 64% 3% of total firms were publicly-held but had 64%

of total U.S. business receiptsof total U.S. business receipts

28.7%

51.3%

17.0%

3.0%

2007 Firms number

Female-owned Male-ownedEqually-owned* Publicly held**

3.9%28.2%

4.2%

63.6%

2007 Receipts ($1,000)

Female-owned Male-ownedEqually-owned* Publicly held**

Some of My Reports on GenderSome of My Reports on Gender

• September 2011 – Gender Issues: Privately Owned and Publicly Held U.S. Firms

• August 2010 – Gender and Establishment Dynamics, 2002-2006

• August 2006 – Women in Business: A Demographic Review of Women’s Business Ownership

• September 2005 – U.S. Sole Proprietorships: A Gender Comparison, 1985-2000

ConclusionsConclusions

• Owning a business doubles the probability of being high income household (or 8 times high net wealth household)

• States with high business density tend to have higher household income and lower poverty rate

• Women Business Density has stronger explanatory power than total BD for medium household income

• In 2007, women-owned startups created 34% of total 6 million new jobs, of which, 10% were employment jobs and 90% were entrepreneurial jobs

• Ten states had negative growth rate of real median household income for 1997-2007 despite high GSP growth