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United States Small Business Administration 
Office of Advocacy 
RS 151_______________________________________________________________________________________________







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Purpose

Despite the rapid increase in the number of businesses owned by
women, there has been little research on the financial success
of women business owners. The Office of Advocacy, as part of its
continuing efforts to understand the role of women business owners,
sponsored this project to examine the financial success of women
business owners, relative to men.

That women as employees earn less than equally qualified men has
been well established by numerous studies. One source of these
lower earnings for women is discrimination against women by employers.
(Discrimination is taken to be any earnings differential that
remains after all other "explanatory" determinants of
income are statistically controlled.) Women who are business owners
would not suffer labor market discrimination, and therefore, business
ownership should offer women a more equal opportunity compared
with employment. However, there may be discrimination against
women in product or credit markets that could reduce the earnings
of women business owners. This could make business ownership a
less equal opportunity for women.

Scope and Methodology

The study focused on the earnings of 76,959 women who reported
that they were self­employed in their own incorporated or
unincorporated businesses. Data came from the Public Use Microdata
Samples (PUMS) of the 1990 Population Census. The study compares
their earnings with those of self­employed men for the 1990
census year. Earnings differences between self­employed men
and women were then compared with earnings differences between
men and women who were employees.

The researchers examined differences in characteristics that affect
earnings, such as age, education, occupation, marital status and
the presence of children. Other determinants of earnings from
business ownership could not be accounted for because they are
not recorded in the Census. Among the unmeasurable variables were
the age and size of the business from which self­employment
earnings were derived, the quality and type of education, and
the extent of interruptions in the owner's work history. Gender
earnings differences that should be attributed to the excluded
factors can be mistakenly attributed to discrimination; therefore,
the impact of discrimination reported in this study may be overstated.

Highlights

The results show that the women in these small businesses earn
less than a similar sample of men business owners, and that the
gender gap for women who are self­employed is larger than
the gender gap for women employees. The larger gap for self­employed
women was consistent across many subgroups of women including
married and unmarried, college educated and high school educated,
those who have never had children and those who have had children.

- While the average earnings of self­employed women ($16,652)
were 47.9 percent lower than the average earnings of self­employed
men ($31,937), the average earnings of women employees ($20,152)
were 35.3 percent lower than the average for men employees ($31,123).
- The study examined the effects of non­gender determinants
of earnings, including differences in education, hours worked,
race, full­ or part­time status, physical disabilities,
geographic location and occupational choice. The residual gender
earnings gap between women and men who were self­employed
was found to be larger (33.1 percent) than that between women
and men employees (21.8 percent).
- Although the computation of the gender gap was able to control
for a large number of factors that determine earnings, some factors
were omitted because they are omitted from the Census - especially
those that bear on the size and age of the business and the respondent's
labor force history.
- The magnitude of the residual gender gap is related to marital
status. The gap was smallest among single men and women, and largest
among married people - but in both cases the gap was higher for
those who are self­employed than for employees. Specifically,
the residual gender gap was 16.1 percent for single self­employed
workers, compared with 12.4 percent for single employees; the
gap was 38.4 percent for married self­employed workers, compared
with 28.3 percent for married employees.
- The differences between self­employed women and women
employees with and without children suggest that women who are
self­employed have greater flexibility in balancing household
and business responsibilities than do women who are employees.
- An analysis of discrimination among employees by firm size
and occupation found that among employees in small­firm­dominated
industries, the residual gender gap was 21.8 percent; among employees
in large­firm­dominated industries, the residual gap
was 16.8 percent. In occupations where employees have a large
amount of direct contact with clients, the residual gap between
men and women employees was 25.0 percent; in occupations where
employees have little direct contact with clients, the residual
gap was 12.2 percent.
- The results of this study indicate that women business owners
face more obstacles in attaining income equality with men business
owners than do women employees vis­à­vis men
employees. To the extent that the gender earnings gap reflects
gender discrimination, the study suggests that self­employed
women are more likely to be affected by buyer discrimination.
The analysis of the existence of consumer discrimination across
occupations suggests that this source of discrimination is a significant
factor behind the large gender gap for self­employed workers.

Ordering Information

The complete report is available from:

National Technical Information Service
U.S. Department of Commerce
5285 Port Royal Road
Springfield, VA 22161
(703) 487-4650
(703) 487-4639 (TDD)

Order Number: PB95­187365

Cost: A04; A01 Microf.
*Last Modified 6-11-01