Human Capital and Women’s Business Ownership

Darrene Hackler, Ellen Harpel, and Heike Mayer—Business Development Advisors, 

Arlington, VA 22201 [74] pages, under contract no SBAHQ-06-M-0481.

This report was developed under a contract with the Small Business Administration, Office of Advocacy, and contains information 

and analysis that were reviewed and edited by officials of the Office of Advocacy. However, the final conclusions of the report do not 

necessarily reflect the views of the Office of Advocacy.

Women entrepreneurs are among the fastest growing 

groups of business owners. The number of women 

starting and owning businesses increased dramatically over the last few decades. Furthermore, the 

types of businesses women tend to own are changing. An explanation for why women have emerged 

as an important entrepreneurial group and why they 

have moved beyond traditional sectors can be found 

in examinations of changes in women’s human 

capital—especially their educational attainment and 

occupational representation.

Two implications of these changes are the increase 

and associated structural shifts in women’s self-employment. As women have become better educated 

and as they have had the opportunity to follow a 

career, they have been able to develop not only their 

educational, but also their occupational and entrepreneurial skills and therefore become more prepared to 

enter self-employment.

The changes in women’s educational and career 

attainment may, however, have multifaceted characteristics. Women might have increased their enrollment in college compared to men, but they may still 

differ in terms of the types of subjects in which they 

are enrolled. Additionally, women might not yet be 

as well represented as men in managerial and executive positions, which would prepare them for running 

their own business. Given these trends and issues, 

the authors of this paper are interested in the following research questions:

• What are the trends in human capital improvement for women?

• What is the relationship between various types 

of human capital and women’s business ownership?

• How does the relationship between human 

capital and women’s business ownership compare to 

other demographic groups?

Answering these questions will shed light on the 

relationship between different elements of human 

capital and self-employment among women. 

Overall Findings

This analysis shows that self-employed women differ 

on most human capital variables compared to women 

who are wage and salary-earning earners. The study 

finds that self-employed women have more education and increased their educational attainment at a 

faster rate compared to other working women. The 

percentage of self-employed women in managerial occupations consistently exceeded the rate for 

other working women, and self-employed women 

participated in different industries than other working women. Self-employed women were also more 

likely to be self-employed in the previous year, were 

older than wage and salary-earning women, and had 

greater income diversity. 

Self-employed men and women differ little in 

education, experience and preparedness—at least by 

the end of the study period. Important differences 

remain when considering occupational and industry 

experience. A lower percentage of self-employed 

women hold managerial occupations than do selfemployed men, and there are lower rates of selfemployment in industries where there is less overall 

female participation (such as communications, 

transportation, wholesale trade, manufacturing, and 

construction).

Highlights

• Self-employed women differ from wage and 

salary-earning women on most of the human capital 

variables that were examined; however, there is no 

strong association between such factors as age, curApril 2008 No. 323
rent earnings, education, and income diversity and 

self-employment among women. 

• There is a strong association between 1) holding 

a managerial occupation and 2) industry sector participation and self-employment among women.

• Contrary to expectations, neither wage and salary-earning nor self-employed women significantly 

shifted industry participation over this portion of 

the study period. However, wage and salary-earning 

women were somewhat more likely than self-employed women to be in industries with the greatest 

degree of female ownership (primarily social services and education services). Self-employed women 

were more likely to be in industries with a medium 

presence of female ownership. This suggests, according to the authors, that self-employed women were 

branching out of industries traditionally associated 

with women.

• More self-employed men hold an advanced 

degree compared to self-employed women over the 

study period, but the gap narrowed considerably by 

2006.

• Self-employed minorities were slightly more 

likely than self-employed whites to have a college 

degree throughout much of the study period. By 

2006, the percentage of all self-employed groups by 

race and gender having a college degree were clustered around 22 to 23 percent.

• Earnings data show that the self-employed were 

most likely to be either in the first (lowest) or fourth 

(highest) quartile.

• High percentages of the self-employed were in 

the 40–49 and 50–59 age groups.

Scope and Methodology

This analysis uses data from the Current Population 

Survey (CPS) Annual Social and Economic 

Supplement (ASEC) (formerly the Annual 

Demographic Supplement or March Supplement.) 

The CPS is a monthly survey of households conducted by the Bureau of Census for the Bureau of 

Labor Statistics that provides data on the labor force, 

employment, unemployment and persons not in the 

labor force. 

The authors use CPS data to explore the relationships between entrepreneurship and the broader 

concept of human capital, including education, experience, and entrepreneurial preparedness measures, 

for three sub-samples of the CPS data from 1994 to 

2006. First, they examine the effect of these factors 

on women to determine if different levels of human 

capital are related to self-employed women compared to wage and salary-earning women. Second, 

comparisons are made between self-employed 

women and men on various human capital components. Finally, the authors broaden their analysis to 

determine how these relationships explain self-employment among minorities and whites, as defined 

within the CPS. 

A series of cross tabulations are utilized to examine these relationships for each sub-sample over 

thirteen years to determine if there are changes that 

follow the trends we have discussed above and to 

determine if certain types of human capital are likely 

to affect self-employment differently among the 

three sub-samples. Finally, the authors conducted 

statistical tests of significance and strength of association between each variable and each category of 

self-employed.

This report was peer reviewed consistent with the 

Office of Advocacy’s data quality guidelines. More 

information on this process can be obtained by contacting the director of economic research at advocacy@sba.gov or (202) 205-6533.

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