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How School Closures Have Widened the Divide Between Men- and Women-Owned Businesses in the Quarantine Economy

Luke Pardue Economist, Gusto 
How COVID-19 School Closures Have Impacted Women-Owned Businesses - Gusto

In a recent Gusto report, we examined the differences in recovery between men and women workers, finding that the “termination gap” significantly widened this year. Over the course of the current pandemic, women were 24% more likely to be furloughed than men and 22% more likely to be terminated. Additionally, we found that the recovery among small businesses is largely concentrated in male-owned businesses. From March to September, the headcount growth rate in male-owned businesses is more than double of those owned by women.

Research elsewhere has found that earlier school closures, and the additional caregiver burdens placed on mothers, significantly reduced working women’s participation in the labor force. One analysis estimated that 1.6 million women have dropped out of the labor force due to childcare demands. 

As cities across the US implement new rounds of closing of schools and childcare centers, Gusto analyzed the potential impact these additional closures will have on female business owners and their recoveries. In the past, male-owned businesses have exhibited slightly higher rates of headcount growth–21% higher than businesses owned by women in 2019. But as the pandemic has rolled on in 2020, that rate has increased to 133%. With a new round of school closures, the recovery gap between businesses owned by men compared to women may increase to between 181%.

Just as school closures have forced working mothers to reduce hours or leave jobs completely in order to take care of children, it is likely that the increase in childcare duties has taken a large toll on female business owners, who now need to juggle childcare responsibilities with making payroll and keeping employees and customers safe. To the extent that these new burdens fall disproportionately on mothers rather than fathers, the closures of schools and childcare centers can explain a large share of the gap in recovery between men- and women-owned businesses.

Key Findings 

  • School closures are responsible for 44% of the increase to the employment recovery gap between men- and women-owned businesses. Since the onset of COVID, businesses owned by men have been able to increase headcount at a rate of 133% greater than women-owned businesses.
  • Additional childcare burdens are taking a particularly large toll on women in traditionally male-dominated industries. While this relationship between school closures and the recovery gap is not apparent in industries where women comprise a majority of business owners (e.g. Salon & Spa, Healthcare & Social Assistance), it is particularly clear in industries where women make up less than half of business owners. 
  • If US states return to prior levels of school closures, the employment recovery rate at male-owned businesses could increase to 181% greater than women-owned businesses by Spring 2021. 

To examine the effect of school closures on this gender gap in business recovery, we combine Gusto’s platform data with state-level measures of schooling disruption from the Census Bureau’s Household Pulse Survey. For each state, we calculate the difference between male- and female-owned businesses headcount growth from March to October 2020. There is considerable variation across states in this trend. In New Mexico, for instance, headcount growth at male-owned businesses was 256% greater than that in women-owned businesses. On the other hand, in Iowa, female-owned businesses grew by 179% more from March to October.

We combine this data on headcount growth with an estimate of how many families continue to face schooling disruption, as measured in the Census Household Pulse Survey. Each state’s schooling disruption rate is calculated as the percent change in households who report that schooling has been cancelled, moved online, or otherwise changed between March and October. Families in states with near-zero change (such as New Mexico and Maryland) continue to cope with childcare burdens as in-person schooling remains shut down. More negative rates of disruption (such as Iowa and Kansas) represent a higher degree of school re-opening. 

Figure 1 plots this relationship between schooling disruption and the gender gap in headcount growth. There is a strong relationship between the degree to which schools remain closed and the gap between the male and female businesses recovery[1]. In states in which in-person schooling remains off the table, male-owned businesses have recovered to a much greater degree. A 10% increase in the portion of families facing schooling disruption in a state is associated with a 37% increase in the gender gap in headcount growth. Additionally, school closure rates can explain one-third of this variation in the recovery gap between genders. This relationship is also robust to controlling for the growth in a state’s COVID-19 cases between March and October.

Figure 1

fig1_ppp_all

Analyzing impact across female-majority industries 

We also look at this relationship within industries where women comprise a majority of business owners nationally and where women comprise a minority of owners. In table 1, women comprise over 50% of business owners in just four industries: Salon & Spa (62.3%), Other (54.2%), Other Personal Services (50.6%), and Healthcare and Social Assistance (50.4%). Interestingly, when we restrict data within each state to those industries, plotted below in Figure 2, we find no relationship between school disruption and the gender gap in headcount growth. 

However, looking at the remaining industries, where women make up between 16% and 44% of business owners, plotted in Figure 3, we see the trend remains stable, suggesting that these additional burdens are forcing women business owners out of already male-dominated sectors of the economy. 

Figure 2

fig2_women_maj

Figure 3

fig3_women_min

The potential effect of additional schooling disruption

From the Spring ‘20 to the Fall ‘20, schools in many states re-opened for in-person instruction. Nationally, 98% of families were affected by some form of change in schooling in the spring, while 86% remained affected in mid-October. With the recent rise in coronavirus cases across the country, many school districts that had started in-person schooling are returning to alternate forms of instruction–with New York City schools among the most notable.

In order to assess the impact of additional school closures in the owner recovery gap, we can apply the effect estimated above to a scenario where schools return to levels of disruption seen earlier in the spring. In such a scenario, these additional school closings could widen the recovery gap between male- and women-owned business by 48 percentage points to 181%. That is, employment at male-owned businesses could recover at a rate almost triple that of female-owned businesses[2].

Conclusion

In this report, we find a significant relationship between the gap in the recovery of women-owned businesses (relative to male-owned businesses) and the extent which schools have remained closed. This gap is largely driven by trends in industries in which women already represent less than half of business owners. As the coronavirus continues to spread at high rates, additional school closings could widen the gender gap in business recoveries from 133% to 181%.

About Gusto

Gusto is a modern, online people platform that helps small businesses take care of their teams. In addition to full-service payroll, Gusto offers health insurance, 401(k)s, compliance and expert HR, and more. The company serves over 100,000 businesses nationwide and has offices in Denver, New York City, and San Francisco.

Appendix

Table 1: Percent of Women-Owned Businesses, by Industry

Industry% of Companies Women-Owned
Accommodations29.65
Accounting44.50
Agriculture34.07
Arts & Entertainment29.48
Automotive16.97
Communications33.63
Construction19.77
Consulting31.22
Education44.08
Facilities26.74
Finance23.64
Food & Beverage35.67
Government41.14
Healthcare & Social Assistance50.44
Insurance28.43
Legal36.29
Manufacturing24.69
Mining & Oil22.74
Non-Profits & Associations43.84
Other54.21
Other Personal Services50.64
Other Professional Services31.61
Real Estate31.39
Retail36.20
Salon & Spa62.29
Sports & Recreation35.77
Technology18.39
Tourism22.83
Transportation20.02
Unknown34.64
Utilities22.49
Warehousing25.91
Wholesale29.58

Table of Data in Figure 1

StateSchool Disruption RateGap in Headcount Growth, Men compared to Women-Owned Businesses
NM0.5255.6%
DC-2.4207.5%
HI-9.6160.9%
WA-3.9133.3%
VT-5.0131.1%
NV-11.784.0%
CA-5.080.1%
CT-8.470.3%
AZ-4.567.9%
GA-25.562.8%
OR-4.160.0%
IL-13.560.0%
VA-9.359.5%
AL-35.259.1%
RI-14.756.4%
MA-3.956.2%
OH-12.345.8%
TN-24.245.3%
TX-16.445.2%
NJ-4.743.8%
MI-16.943.0%
ID-22.339.8%
NC-6.136.7%
AR-45.835.4%
FL-23.327.7%
MD-2.722.6%
LA-29.121.7%
MN-14.718.9%
KY-12.15.7%
CO-11.11.2%
SC-15.40.8%
OK-31.7-1.8%
NH-7.8-2.8%
WI-24.6-3.1%
NE-52.3-5.0%
PA-7.9-10.7%
ME-11.1-23.9%
NY-7.1-24.9%
MO-24.9-28.3%
UT-23.5-32.0%
KS-37.6-58.1%
MT-45.2-87.3%
IN-26.6-100.2%
IA-42.4-178.5%

[1] In all data analysis, we only include states for which there are at least 1000 male-owned and female-owned businesses each. We also exclude two outlier states for which the gap in growth between male- and female-owned businesses was greater than 2000% or less than -2000%. These restrictions leave us with 44 states and the District of Columbia.

[2] The relationship estimated above implies that a 1% increase in the portion of families facing schooling disruption in a state is associated with a 3.7% increase in the gender gap in headcount growth. If states return to levels of disruption seen earlier in the spring, this will represent a 13% increase across the country (98% is a 13% increase above 86%). A 13% increase in schooling disruption will lead to a (13 x 3.7 = ) 48.1% increase in the recovery gap between male- and female-owned businesses.

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Luke Pardue
Luke Pardue Luke Pardue is an Economist at Gusto, researching how public policies help small businesses and their workers thrive. He is a PhD Candidate in Economics at the University of Maryland, where he studies the effects of government programs on disadvantaged populations’ housing and labor market outcomes. Luke currently lives in Washington, D.C.

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