Why female entrepreneurs are key to getting more women into the workforce

A new study highlights how promoting female entrepreneurship can significantly increase women’s labor force participation. By creating more opportunities for other women, women-led businesses can drive significant economic growth, the report says.

Imagine a world where women, despite making up half the population, own less than a fifth of the businesses.

This is the reality found in a World Bank survey of 138 countries conducted from 2006 to 2018.

Even more interesting is how women-owned businesses empower other women.

Only 23% of employees at male-owned businesses are women, but female-owned businesses employ far more women. While only 6.5% of male-owned businesses have women as top managers, more than half of female-owned businesses are led by women.

In India, the situation is more challenging. The female labor force participation rate and entrepreneurship rate are low, and the total female labor force has barely changed over the past 30 years.

But when it comes to entrepreneurship, things are looking slightly better.

Women entrepreneurs account for about 14% and have a sizeable share in micro, small and medium enterprises (MSMEs). They contribute significantly to industrial output and employ a large proportion of the workforce, According to the State of Livelihoods in India Report 2023.

MSMEs in India are mostly micro-enterprises, and many of these women-owned businesses are one-person businesses. Niti Aayoga government think tank. While some women-owned businesses employ large numbers of workers, most have very few.

So, women in India are not really underrepresented in the entrepreneurial space, but they run much smaller companies than men—especially in the informal sector.

Not surprisingly, women’s contribution to India’s GDP is only 17%, less than half the global average. India ranks 57th out of 65 countries according to Indian Women Entrepreneurship Index Global Entrepreneurship Monitor Report 2021.

a new one Paper Authors: Gaurav Chiplunkar (University of Virginia) and Pinelopi Goldberg (Yale University) argue that promoting female entrepreneurship can significantly increase women’s labor force participation because female-led businesses often create more opportunities for other women.

The authors develop a framework to measure the barriers faced by women in India when entering the labor market and becoming entrepreneurs.

They found that women faced significant barriers to employment and that female entrepreneurs had higher costs when expanding their businesses by hiring workers. Their simulations show that removing barriers will promote the growth of female-owned businesses, increase female labor force participation, and replace less productive male-owned businesses through higher wages, profits, and more efficient female-owned businesses. to promote economic growth.

Therefore, the authors believe that policies to support female entrepreneurship are crucial. Policies that promote entrepreneurship and increase labor demand — allowing more women to become entrepreneurs — may be more effective and faster than changing long-standing social norms, Chiplenka said.

“History tells us that norms are sticky,” says Ashwini Deshpande of Ashoka University.

Women still do most of the household chores—cooking, cleaning, laundry, childcare, and elder care. There are additional barriers, including limited access to safe, efficient transportation and child care, that limit their ability to work within commuting distance. As a recent survey shows, even women’s limited ability to travel independently is a key factor limiting their participation in the labor market. study Led by Rolly Kapoor, University of California.

Despite the recent rise in female labor force participation in India, as Ms. Deshpande noted in a report, the picture is not as rosy as it seems. Paper.

She found that the increase reflected an increase in self-employed women, a combination of paid work and disguised unemployment, where more people are employed than are actually needed for the task, leading to low productivity.

“There is an urgent need to increase women’s participation in regular paid jobs with work contracts and social security benefits. This will be the most important step towards women’s economic empowerment, although not the only one,” Ms Deshpande said.

It’s not easy. For one, many women face barriers from home and community when it comes to working, whether or not they want to be entrepreneurs. If more women enter the workforce but there are not enough jobs because barriers to entrepreneurship remain, wages may actually fall.

Research Showing that women in India work when opportunities arise suggests that declining labor force participation is a result of insufficient employment opportunities and reduced demand for women’s labor. A recent Barclays research report said that India can achieve 8% GDP growth by ensuring Women make up more than half of the new workforce By 2030.

Promoting female entrepreneurship could be a way forward.