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How the Pandemic’s Childcare Crisis Impacted Women-owned Businesses and Altered their Future

Luke Pardue Economist, Gusto 
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Gusto, the all-in-one small business payroll and benefits platform, partnered with the National Association of Women Business Owners (NAWBO) to survey 1,199 female business owners across industries about their experiences during the COVID pandemic and resulting recession. The survey asked about a range of topics, from how they have adapted their business over the past year to the policies that can help them grow. In this report, we examine the effect school and childcare disruptions have had on women business owners and their businesses, with a particular focus on those with school-aged children. The report also delves into how these disruptions have altered women business owners’ plans for the future and what they need to survive and thrive beyond the pandemic.

Key Findings:

  • Many women business owners are feeling the squeeze at both ends. Overall, 31% of women business owners have school-aged children at home. That means about one-third of women business owners have been squeezed at both ends, feeling the demands of keeping a business afloat during an unprecedented economic downturn while also making sure children stay healthy and continue to learn in the midst of a global pandemic. 
  • Business disrupted. Changes to schooling have been disruptive for all women business owners and particularly for those who have children at home: 61% of women owners with children at home report that school closures have impacted their business, and 30% of such owners reported scaling back due to childcare needs. This stress has been particularly acute among those who own businesses in industries hit hardest by this pandemic.
  • The working moms exodus. Childcare needs have affected women in the workforce as well: 20% of businesses reported women leaving jobs due to childcare needs and 40% of businesses reported that female workers were forced to reduce their hours to care for children. 
  • Government lifelines have fallen short(er) for women-owned businesses. Among women with school-aged children in this survey, 59% reported receiving PPP loans. This rate is significantly below the 72% of all businesses that received a loan and is particularly alarming when considered with the statistic above that owners with children at home were more than twice as likely to have scaled back their business due to childcare concerns. 
  • Nevertheless, she persisted. Looking ahead, despite the trials these women have been put through this past year, the most common feeling among women business owners was hopeful. As the pandemic is expected to wane and schools re-open, women with school-aged children are committed to reversing the cuts of the last twelve months and to moving their businesses forward. Over half of these women (53%) plan to increase the number of employees this year. At the same time, when asked what their businesses need – the top response was more gov’t grants/loans. 
  • Childcare solutions: it takes a village. The pandemic exacerbated America’s childcare crisis, and led many business owners to rethink their own benefits. Of the women surveyed that are employer business owners, 6% offered childcare benefits to their employees pre-pandemic. By year-end 14% of the businesses said they will offer childcare benefits. 

The Impact of School Closures on Women Business Owners and Workers

Overall, 31% of business owners have school-aged children at home. That means about one-third of women business owners have been squeezed at both ends, feeling the demands of keeping a business afloat during an unprecedented economic downturn while also making sure children stay healthy and continue to learn in the midst of a global pandemic. Across industries, this rate is highest in the Non-Profits, Education, and Healthcare sectors—collectively 36%—and lowest in professional services, at 28%. 

School closures have been disruptive for all business owners but particularly those who have children at home: 42% of all owners reported that these disruptions have impacted their business during this pandemic. This impact is concentrated among owners with school-aged children at home: 61% of such owners report that school closures have impacted their business, compared to 34% of those without school-aged children. One particular form of business disruption is the toll these closures take on workers: among all owners who have been impacted by school closures, they have seen female workers reduce their hours and leave employment altogether: 41% said they have female workers reduced their hours, and 21% said that they lost female workers due to childcare needs

Finally, schooling disruption has taken a large toll on the businesses of mothers throughout the pandemic. Across the whole sample, 12% of owners have been forced to scale back their business as a result of childcare needs. Only 4% of owners who do not have school-aged children at home have had to curtail their business, while 30% of owners who do have school-aged children report scaling back due to childcare needs. 

This stress has been particularly acute among women who own businesses in industries hit hardest by this pandemic, such as Retail, Bars, Restaurants, and such. Table 1 presents responses to questions about actions owners of business in hard-hit industries have taken or have considered taking over the course of the pandemic, across all owners and separated by whether or not they have school-aged children at home. Among all owners in these industries, 14.5% have been forced to scale back their business, while 32.8% of owners with children at home have had to. Additionally, 29% of owners have considered leaving the workforce altogether, while 40% of owners with children have contemplated this step. 

This pandemic has exposed the ways in which the US economy relies on childcare, and the statistics above expose the toll economic costs and the additional burden placed on mothers by the lack of childcare options. We asked women business owners about benefits provided to their employees and how they plan to change benefits going forward.

Across the whole sample, 6% of employer business owners currently offer childcare benefits to their employees, and 8% plan to offer childcare benefits for the first time in the coming year. That means, by year-end 14% of businesses will offer childcare benefits. The most widespread benefit offered is a flexible work schedule, which is provided by 38.2% of these businesses. Indeed, when business owners were asked to rank all benefits by importance to employees, a flexible work schedule ranked second only to health insurance (above 401(k) and remote work). 

Aid Policies and the Women-owned Business Outlook

In terms of the federal policy response, we asked the women business owners about their experiences with two of the largest forms of small businesses support enacted by Congress: (1) the Paycheck Protection Program (PPP), which provided 10 weeks of payroll in the form of a forgivable loan, and (2) refundable tax credits under the Family First Coronavirus Relief Act (FFCRA), under which small business were reimbursed for providing paid leave for employees to care for loved ones who contracted the coronavirus or to look after children whose school has closed due to the virus, among other reasons. Among both of these programs, we see relatively low rates of participation among women businesses owners, hindering their ability to access much-needed help.

27% of women business owners reported that they have claimed tax credits under FFCRA in 2020. Although 54% who did not use these credits said it was because “no employee needed COVID sick leave,” 20% of owners did not because they were unfamiliar with or unaware of this program.  While this program has become optional at year-end, 82.2% of businesses that had claimed credits plan to continue to utilize these tax credits for paid leave going forward. This high rate of continuation speaks to the effectiveness of this policy response among those who were able to use it and to the value placed on paid sick leave among business owners and employees. Going forward, efforts should be made to simplify the program and increase awareness in order to expand usage.   

Turning to the paycheck protection program, prior research has found that women business owners were left out of initial PPP loans to a greater extent than their male counterparts, and this survey finds similar patterns. 53% of women business owners in this survey reported receiving a first-round PPP loan. Among women with school-aged children in this survey, the number rises just slightly to 59%. Both are significantly below the rates found among the broader population. A recent survey found 72% of all small businesses received PPP loans. This is particularly alarming as women have been affected by this pandemic to the greatest degree, and yet they have received less support from government aid programs.

Looking Forward

When asked “what do you feel most this year?”, the most common response among all women and women with school-aged children was “hopeful,” selected by 62% of both groups. Indeed, among all employers in the sample, a large plurality (47%) plan to increase the number of employees this year. Owners with school-aged children plan to increase hiring to a slightly greater degree (53%), and are less likely to plan to decrease the number of employees (2% vs. 3% among all). These patterns likely reflect the fact that, as noted above, these women are more likely to have already scaled back their business to the greatest degree, and, as the pandemic recedes and schools re-open, they are optimistic they will be able to return to more normal employment levels.

Table 1: What are your hiring plans for next year?

All OwnersOwners with school-aged children
Return to pre-pandemic levels6%8%
Maintain current number of employees40%35%
Increase number of employees47%53%
Decrease number of employees3%2%
Source: Gusto-NAWBO Survey.

In Conclusion

The data suggests that women business owners have been dealt a doubly difficult hand during this pandemic, yet they remain committed to growing their businesses. They must grapple with keeping employees safe and their business afloat while also taking on the responsibilities of caring for children and loved ones. The growth of women business owners and workers has driven the U.S. economy over the last several decades: just before the COVID-recession hit, women reached a majority of the private sector employment for the first time ever. By the mid-2010’s women-owned businesses were growing at twice the rate of the US as a whole. The pandemic, however, has erased much of these gains: women’s labor force participation is now at a 33-year low, and has fallen steeply for mothers of school-aged children. Gusto’s own data has shown that, through October 2020, women-owned businesses have recovered employment at a 133% lower rate than male-owned businesses.

It is incumbent upon policymakers to ensure that women business owners are getting the help they need and deserve. This support can come in many forms. When asked “What does your business need immediately in order to survive?”, the number one response — selected 46% of respondents — was more government grants/loans. Fixing the inequities in who gets access to PPP should be a priority. 

There is more that needs to be done than additional aid, however. In response to that question above, the second most common response was needing “more time to work on my business.” Today, there are simply not enough hours in the day for women to fulfill the roles we have come to expect: mother, virtual teacher, employee, or business owner. Creating a level playing field in this economy involves achieving many crucial (and not by any means easy) objectives: solving the current childcare crisis, expanding access to paid family leave, and, ultimately, changing norms and expectations around household responsibilities. These short- and long-term fixes will go a long way to supporting women entrepreneurs and to building an inclusive economy that will be the foundation of long-run prosperity.

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Updated: March 22, 2021

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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