Gender Equity in Business Ownership: State-by-State Analysis of a New Equity Index
November 22, 2022
Author: Khaliun Battogtokh
Introduction
Between 2014 and 2019, the number of women-owned businesses grew by 21%, far outpacing the rate of growth in the number of businesses overall (just 9%). This impressive growth was even more pronounced among businesses owned by women of color, with the number of women of color owned businesses growing at double the rate (43%), and, specifically, the number of African American/Black women-owned businesses increasing by 50%. In fact, the growth in women’s business ownership over this time period has largely been attributable to the growth in businesses owned by women of color–89% of all new women-owned businesses created between 2014 and 2019 were owned by women of color.
Yet while women have become better represented among business owners in recent years, now making up more than 40% of all businesses in the US, this encouraging trend doesn’t take into account the full experience of women-owned businesses in the US. For example, our analysis of data from the 2018 Non-Employer Statistics (NES) and 2019 Annual Business Survey (ABS; both for reference year 2018) shows that women-owned businesses are less likely to hire than men-owned businesses (9.6% compared with 19.7%). Previous research has shown that on average, minority- and women-owned businesses have 30% fewer employees compared to male-or white-owned businesses. Women-owned businesses are also disproportionately located in lower-revenue industries such as services (hair and nail salons), healthcare and social assistance (child day care and home healthcare services), professional technical services (lawyers, bookkeepers, architects, public relation firms, and consultants), and, as a result, earn revenues that are significantly lower than their male-owned counterparts. Our analysis of data from the NES and ABS shows that in 2018, women-owned non-employer businesses earned just 36.5% of the revenues that men-owned non-employer businesses did, and women-owned employer businesses were less likely than their male-owned counterparts to earn revenues of $500,000 or more (34.6% compared with 45.6%).
At the same time, businesses owned by women have been disproportionately impacted by the COVID-19 pandemic. According to a study by the U.S. Chamber of Commerce, 47% of female business owners ranked their business’s overall health as somewhat or very good in July 2020 (down 13 percentage points from January 2020), while 62% of male business owners reported the same (down just 5 percentage points). To combat these economic challenges, Congress passed legislation establishing the Paycheck Protection Program (PPP), which allocated $796 billion in loan funding to small businesses owners to help them offset some of the losses they incurred and enable them to retain their employees. Because of the eligibility requirements as well as the quick rollout of the program and disbursement of funds and inequities in access to banking relationships, early rounds of the PPP were less likely to reach businesses owned by women and people of color, and they were less likely to reach newly established businesses that had just started out during the pandemic. In response to the criticisms about inequitable access to emergency relief funding, Congress and state legislators have begun to prioritize equity by modifying existing programs and developing new programs to better reach underserved businesses that were hit hardest by the pandemic.
Given these recent trends and the increased attention being paid to inclusive economic recovery, it is important to look at women’s experiences with business ownership from a more holistic perspective and track progress over time. This will give us an understanding of how women business owners are faring in the entrepreneurial ecosystem and whether equity-focused policies and programs at the national, state, and local level are having the intended effect of promoting the success of businesses owned by people from diverse backgrounds.
To this end, we developed The Gender Equity in Business Ownership Index which is based on four component measures:
Ratio of Women’s Share of All Businesses to Women’s Share of the Workforce
Ratio of the Share of Women-Owned to Men-Owned Businesses that are Employers
Ratio of Average Revenues of Women-Owned to Men-Owned Non-Employer Businesses
Ratio of the Share of Women-Owned to Men-Owned Employer Businesses with Revenues of $500,000 or More
Below, we provide state-level data on the Index as well as its component measures, and rank states based on their performance. This data will be updated annually so that policymakers can observe trends in their state, identify opportunities for greater investment in their business communities, and evaluate the effectiveness of policies and programs they implement.
The Gender Equity Index
Figure 1. Comparison of States on the Gender Equity in Business Ownership Index and Component Measures, 2018
Note: Select the index or component you are interested in visualizing with the map by clicking the corresponding box at the top of the figure. Hover over a state to view relevant data. Darker shading in a state indicates the state is performing better relative to more lightly shaded states. States shaded in gray are missing one or more necessary data points needed to report on the selected measure and are thus not ranked.
Source: Author’s analysis based on data from the 2018 Non-Employer Statistics by Demographics and the 2019 Annual Business Survey for the reference year 2018 as well as the 2014-2018 American Community Survey.
| Top 5 States | Bottom 5 States |
|---|---|
| 1. Hawaii | 42. Michigan |
| 2. New Mexico | 43. Iowa |
| 3. California | 44. South Dakota |
| 4. Nevada | 45. Wisconsin |
| 5. Arizona | 46. Nebraska |
We can see from the map that the Western states performed exceptionally well on the gender equity index. Of the top 15 states, 9 were Western states, and all of the top 5 states on the gender equity index were Western states. Of the Western states, Utah ranked the lowest at 25. Conversely, the Midwestern states tended to perform more poorly on the index–of the bottom 15 states, 7 were Midwestern states, and all of the bottom 5 states were Midwestern states. Of the 12 midwestern states, Illinois ranked the highest at 21.
Performance was more mixed among Northeastern and Southern states. While the Northeast is comprised of 9 states, only 1 (New York) ranked in the top 15 and 3 (Pennsylvania, Vermont, and Connecticut) ranked in the bottom 15. The remaining 5 states were either in the middle of the pack or not ranked (Massachusetts and Rhode Island). Similarly, the South is comprised of 17 states (including the District of Columbia), with 5 states ranking in the top 15, and 5 states ranking in the bottom 15. The remaining states were in the middle of the pack or not ranked (Louisiana and Tennessee).
Performing well on the index overall does not mean that there is no room for improvement, however. The sections that follow will provide greater detail on states’ performance on each of the components of the gender equity index, highlighting both strong performance and opportunities for growth.
Component 1: Ratio of Women’s Share of all Businesses to Women’s Share of the Workforce
The share of businesses owned by women varies significantly across the states:
The states with the greatest shares of women-owned businesses include the District of Columbia (42.2%), followed by Georgia (41.8%), Hawaii (40.1%), Mississippi (40.0%), and New Mexico (39.7%). The states with the lowest shares of women-owned businesses include Delaware (32.3%), followed by South Dakota (32.4%), Wyoming (33.1%), New Jersey (33.2%), and Utah (33.6%; Figure 2).
Figure 2. Share of Businesses that are Women-Owned
Source: Author’s analysis based on data from the 2018 Non-Employer Statistics by Demographics and the 2019 Annual Business Survey for the reference year 2018.
States likely vary in women’s representation among business owners in part because some states may have fewer women working compared with others. Thus, we normalize the share of businesses that are women-owned in each state by dividing it by the share of employed persons that are women. This ratio tells us how well represented women are in the state relative to their representation in the workforce. A ratio of 100% would indicate that women are equally represented among business owners as they are in the workforce. This ratio is the highest in Georgia (86.7%) followed by Texas (84.2%), Hawaii (83.0%), New Mexico (82.7%), and Mississippi (82.1%). Conversely, it is lowest in Vermont (70.0%), New Jersey (69.9%), Maine (69.1%), South Dakota (68.8%), and Delaware (65.5%). Though these low-ranking states have workforces that are nearly evenly split between women and men (with women’s shares ranging from 47.1% to 49.4%), their share of businesses that are women-owned are quite low (ranging from 32.3% to 34.6%; Figure 3).
In contrast, the ratio of men’s share of all businesses to men’s share of the workforce indicates that men are equally or over-represented in 41 states. Even the lowest ratio (88.6% in Wyoming) for men is greater than the highest ratio (86.7% in Georgia) for women (Figure 3).
Figure 3. Ratio of Each Gender’s Share of all Businesses to Each Gender’s Share of the Workforce
Note: Hover over a bar to view relevant data. Data includes both employer and non-employer businesses. The ratio of women’s share of all businesses to women’s share of the workforce for North Dakota and Rhode Island is not plotted in this figure because the source data suppressed information on the share of businesses that are women-owned businesses.
Source: Author’s analysis based on data from the 2018 Non-Employer Statistics by Demographics and the 2019 Annual Business Survey for the reference year 2018 as well as the 2014-2018 American Community Survey.
As noted above, women’s representation among business owners has been increasing substantially in recent years. There are numerous reasons why this might be the case, including the desire among women to gain control over their working lives and better balance their family needs. Our analysis of data from the Annual Business Survey shows that 54.1% of women business owners said that they “wanted to be my own boss” and 59.7% responded that the desire to “balance work and family” was a very important reason for owning their businesses. This is especially relevant in today’s social and economic climate as schools and daycares across the country were shut down due to the pandemic, and women were taking on far more child care work than before, necessitating more flexible working arrangements. While rates of new entrepreneurship increased significantly in 2020 among both women and men, with greater increases experienced by women, rates have since declined, though they remain elevated compared with their pre-pandemic levels. It is unclear yet the extent to which these trends will continue now that more people are returning to the office, and schools and child care centers are once again open.
Component 2: Ratio of the Share of Women-Owned to Men-Owned Businesses that are Employers
In 2018, the greatest share of women-owned businesses that were employers was only 13.8% in Wyoming followed by Montana (13.1%), Alaska (12.8%), Oregon (12.3%), and Delaware (12.3%). The lowest shares were in Tennessee (6.1%), Mississippi (6.3%), Louisiana (6.9%), Texas (7.5%), and Alabama (7.7%). Western states appeared to be doing better on this measure compared with southern states. While relatively few women-owned businesses are employers, employment at women-owned businesses has increased significantly in recent years. Between 2014 and 2019, total employment at women-owned businesses rose 8%, while the increase was just 1.8% among businesses overall. Conversely, the share of men-owned businesses that are employers ranged from a low of 15.4% in Texas to a high of 26.6% in North Dakota (Figure 4).
Figure 4. Share of Women- and Men-Owned Businesses that are Employers and Ratio of Women- to Men-Owned Businesses that are Employers
Note: Hover over a bar or dot to view relevant data. The ratio for Louisiana, North Dakota, and Rhode Island is not plotted on this figure because the source data suppressed information on the share of women-owned businesses that are employers.
Source: Author’s analysis based on data from the 2019 Annual Business Survey for the reference year 2018.
As part of our Gender Diversity in Business Ownership Index, we calculated the ratio of the share of women-owned to men-owned businesses that are employers to reflect the relative likelihood of being an employer. A ratio of 100% would indicate that women- and men-owned businesses are equally likely to have employees. The relative likelihood of being an employer was most equal between women- and men-owned businesses in Hawaii (60.4%) followed by Alaska (60.1%), Wyoming (59.4%), Virginia (56.7%), and Maine (56.2%), and was least equal among women- and men-owned businesses in the District of Columbia (40.8%), Michigan (40.3%), Alabama (39.3%), Tennessee (37.4%), and Mississippi (34.6%; Figure 4). It is unclear, however, whether women-owned businesses are less likely to hire employees because of the nature of the work that they perform and/or a lack of desire to hire employees, or whether women-owned businesses may be facing barriers to hiring employees that could be addressed through policy changes or access to appropriate support services. Because there are such disparate outcomes between women- and men-owned businesses with regard to hiring, it is likely that at least some women-owned businesses are in need of support to grow their businesses and create jobs. Policymakers and program leaders in each state should investigate the underlying causes of women-owned businesses’ lower rates of hiring and determine appropriate policy and programmatic supports that address the unique needs of women-owned businesses in their state.
Component 3: Ratio of Average Revenues at Women-Owned to Men-Owned Non-Employer Businesses
The average revenue of men-owned non-employer businesses is significantly higher than the average revenue of women-owned non-employer businesses across all states. Even the lowest average revenue of men-owned non-employer businesses ($47,808 in West Virginia) is greater than the highest average revenue of women-owned, non-employer businesses ($36,149 in the District of Columbia; Figure 5).
A ratio of average revenues at women-owned to men-owned non-employer businesses at close to 100% would indicate women-owned non-employer businesses earn the same amount of revenue as men-owned non-employer businesses on average (an interpretation similar to that of the gender wage ratio). The states that have the highest ratio of average revenue of women-owned to men-owned, non-employer businesses are Hawaii (66.0%), the District of Columbia (60.7%), California (54.1%), New York (53.3%), and Massachusetts (52.9%). The states that have the lowest ratio are Michigan (42.0%), Alabama (41.8%), Louisiana (40.9%), Mississippi (39.4%), and North Dakota (37.5%; Figure 5). These disparities in average revenues are even larger than observed wage gaps between men and women in the workforce. In 2018, for example women earned 82 cents for every dollar that men earned.
Figure 5. Average Revenue at Women- and Men-Owned Non-Employer Businesses and Ratio of Average Revenues at Women-Owned to Men-Owned Non-Employer Businesses
Notes: Hover over a bar or dot to view relevant data. Data only includes the average revenue of non-employer businesses.
Source: Author’s analysis based on data from the 2018 Non-Employer Statistics by Demographics for the reference year 2018.
There are many possible explanations behind women-owned non-employer businesses’ lower revenues relative to men’s. One possible explanation is that nearly half (46.8%) of all women-owned businesses are concentrated in three industries: ‘Other Services Except Public Administration’ (22%), ‘Health Care and Social Assistance’ (15%), and ‘Professional, Scientific, and Technical Services’ (13%). While these industries have the highest share of women entrepreneurs, their revenues tend to be below average compared with the revenues of women-owned businesses overall. These differences in revenues may also reflect relative differences between women and men in how many hours they work at their business and whether their self-employment is their primary source of income or, rather, a supplementary source of income in addition to income from their primary job.
Component 4: Ratio of Share of Women-Owned to Men-Owned Employer Businesses with Revenues of $500,000 or More
The District of Columbia has the highest share (55.1%) of women-owned employer businesses with revenues of $500,000 or more. Hawaii (44.2%), Delaware (44.0%), Alabama (43.0%), and Texas (41.3%) were also among the top 5 states on this measure. On the other hand, the states with the lowest shares include Iowa (28.0%), Nebraska (27.7%), Maine (27.0%), Idaho (26.8%), and Montana (26.2%). As one can see in Figure 5 below, men-owned employer businesses are more likely to have higher revenues than women-owned businesses across the board. The highest share with revenues for $500,000 or more among men-owned businesses is 64.5% in the District of Columbia, followed by Connecticut (55.9%), Tennessee (54.8%), Alabama (53.7%), and Hawaii (53.0%; Figure 6).
Figure 6. Share of Women- and Men-Owned Businesses with Revenues of $500,000 or more and the Ratio of Women-Owned to Men-Owned Businesses with Revenues of $500,000 or More
Note: Hover over a bar or dot to view relevant data. Data includes only employer businesses. The ratios for Louisiana, Massachusetts, North Dakota, Rhode Island, and Tennessee are not plotted on this figure because the source data suppressed information on the share of women-owned and/or men-owned businesses with revenues of $500,000 or more.
Source: Author’s analysis based on data from the 2019 Annual Business Survey for the reference year 2018.
Because states differ widely in terms of average incomes and cost of living, it makes sense that significant state-level variation exists in business revenues as well. To account for this, and to also illustrate the extent to which women- and men-owned businesses achieve similar outcomes, we calculated the ratio of the share of women-owned to men-owned businesses with revenues of $500,000 or more. A value of 100% indicates that women and men are equally likely to have revenues of at least $500,000. Delaware (91.9%), the District of Columbia (85.4%), Alaska (84.0%), Hawaii (83.4%), and New Mexico (80.5%) rank as the top five states where women entrepreneurs are almost as likely as their male counterparts to earn at least $500,000. The bottom five states include Missouri (61.9%), Maine (61.3%), Iowa (59.6%), Idaho (56.2%), and Nebraska (55.4%; Figure 6).
Conclusion
Women entrepreneurs make significant contributions to the U.S. economy and society. They represent the fastest growing segment of the entrepreneurial ecosystem, with the number of women-owned businesses increasing at a rate of 3.9% annually. Even though this is a positive shift and we are approaching gender-balanced representation in entrepreneurship, it is important to also consider how women-owned businesses are performing compared with their male counterparts. In 2019, for every dollar that a privately held company made, women-owned businesses generated only 30 cents. In addition, women entrepreneurs are concentrated in sectors where firms are smaller and generate smaller revenues, contributing to gender disparities in business outcomes. Helping to close the gap between male and female entrepreneurs has the potential to add more jobs and economic activity to the economy. A recent analysis by Boston Consulting Group (BCG) reveals that closing the gender gap in entrepreneurship could double the Global GDP, increasing the Global GDP from $2.5 trillion to $5 trillion. Therefore, it is crucial for policymakers to understand how their states are performing with regard to gender equity in business ownership, what factors may be contributing to the observed gender gaps in outcomes, and to support policies and programs that can further contribute to inclusive economic prosperity.
Data and Methodology
Primary data on business ownership, employment, and revenues were collected from the 2019 Annual Business Survey (ABS) and 2018 Non-Employer Statistics by Demographics (NESD) for reference year 2018 and supplemented where needed with data from the 2014-2018 American Community Survey (ACS) 5-year file accessed through IPUMS.
Component 1. Ratio of Women’s Share of All Businesses to Women’s Share of the Workforce
To calculate this first component of the index, we first estimate the share of businesses that are women-owned by taking the total number of women-owned businesses in each state and dividing by the total number of businesses in the state, using combined data from the NESD and ABS. We then calculate the women’s share of the workforce by estimating the number of employed women 16 years or older in the state and dividing by the total number of employed people aged 16 years or older in the state, using data from the 2014-2018 Annual Community Survey. Finally, the share of businesses that are women-owned is divided by the women’s share of the workforce to obtain the value of Component 1 in each state. Values below 100% indicate that women business owners in the state are underrepresented relative to their representation in the workforce. Values above 100%, on the other hand, indicate that women business owners are overrepresented relative to their representation in the workforce.
Component 2. Ratio of the Share of Women-Owned to Men-Owned Businesses that are Employers
To calculate the second component of the index, the total number of women-owned employer businesses in each state was divided by the total number of women-owned businesses in each state (both employer and non-employer businesses) using combined data from the NESD and ABS. The same computation was then done for male-owned businesses. Finally, to obtain the value of Component 2 in each state, we divided the share of women-owned businesses that are employers by the share of men-owned businesses that are employers. Values below 100% indicate that women-owned businesses are less likely than men-owned businesses to be employers, whereas values above 100% indicate that they are more likely.
Component 3. Ratio of Average Revenues of Women-Owned to Men-Owned Non-Employer Businesses
To calculate the third component of the index, we first calculated the average revenue at women-owned and men-owned businesses in each state using data from the NESD. This was done by taking the total revenue of all women-owned non-employer businesses in the state and dividing by the total number of women-owned non-employer businesses in the state. The same computation was then done for men-owned non-employer businesses. Finally, to obtain the value of component 3 in each state, we take the average revenue at women-owned non-employer businesses and divide by the average revenue at men-owned non-employer businesses. Values below 100% indicate that women-owned non-employer businesses earn a fraction of the revenues that men-owned non-employer businesses earn, whereas values above 100% indicate that they earn more.
Component 4. Ratio of the Share of Women-Owned to Men-Owned Employer Businesses with Revenues of $500,000 or More
To calculate the final component of the index, we calculated the share of women-owned and men-owned employer businesses earning at least $500,000 in revenues by adding up the number of businesses in each revenue category above $500,000 and then dividing this by the total number of women-owned/men-owned businesses in each state. To obtain the value of component 4 in each state, we then divided the share of women-owned employer businesses with revenues of $500,000 or more by the share of men-owned employer businesses with revenues of $500,000 or more in each state. Values below 100% indicate that women-owned employer businesses are less likely to have revenues of at least $500,000 than men-owned employer businesses are, while values above 100% indicate that they are more likely to have revenues of at least $500,000.
Constructing the Gender Diversity in Business Ownership Index
To construct the Gender Diversity in Business Ownership Index, states were ranked on each of the four elements described above and a weighted average of ranks was calculated. The Index includes two measures of revenue because the NESD, which provides revenue measures among non-employer businesses, provides continuous measures of revenue while the ABS, which provides revenue measures among employer businesses, only provides categorical measures of revenue. Because of this, these components are weighted by the share of women-owned businesses that are employers/non-employers when constructing the index. The weighted average calculation used to calculate the Gender Diversity in Business Ownership Index is as follows:
[Rank of Component 1 + Rank of Component 2 + Rank of Component 3*(Share of Women-Owned Businesses that are Non-Employers) + Rank of Component 4*(Share of Women-Owned Businesses that are Employers)]/3
Appendix: State-by-State Data and Rankings on the Gender Diversity in Business Ownership Index and Component Measures
Note: Data can be sorted in alphabetical order by state as well as in ascending/descending order on any of the data columns. Simply click on the column header to sort the table by that column. Click on the column again to reverse the order of sorting. States with blank cells are missing one or more necessary data points needed to report on the selected measure.
Source: Author’s analysis based on data from the 2018 Non-Employer Statistics by Demographics and the 2019 Annual Business Survey for the reference year 2018 as well as the 2014-2018 American Community Survey.