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Providing for those Who Provide: A Report on Breadwinning Women Business Owners & their Critical Role in the Economic Recovery

Luke Pardue Economist, Gusto 

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 dive into the world of women business owners who are the sole and primary providers for their households, examining their many responsibilities and the importance of their inclusion in this nascent economic recovery. Supporting these women, these breadwinners, means supporting not only the workers they employ but also the families they provide for — and is particularly crucial to averting long-term devastation that will be felt among this country’s children.

Key Findings

  • Sole providers are too big to fail: 56% of women business owners are the sole or primary source of income for these households, and this rate is higher among women of color: among women of color, 65% are the sole or primary earner. They also have little room to cushion any economic downturns – with a median income of $55,000 and an average of 2 dependents in their households.
  • These particular women carry the largest load – as they provide for themselves, their family, their workers, and their communities: on average, women business owners who are sole or primary providers also employ nearly two times as many workers as other owners, with an average size 14 employees compared to 8 workers among other business owners. Furthermore, 18% of minority-owned businesses are in the Non-Profit, Education, or Healthcare sectors, meaning they provide critical services to their local communities while also providing for their own families.
  • They are driven by a vision for the future: Sole or primary providers pursue entrepreneurship to open the doors to a future that is more financially secure for themselves and their children. For instance, 18% of all owners founded their business to pass on to their family, while 39% of sole providers with young children at home indicated that they built their business with that goal. 
  • This pandemic has greatly affected sole or primary providers, and they have been left out of government support programs: These owners have seen a disproportionate impact from the coronavirus recession: 56% of sole or primary providers have experienced large revenue declines of at least 25%, due largely to their concentration in hard-hit sectors. Yet only 53% of these women reported receiving a PPP loan, compared to 72% of the broader small business community, mainly because of the program’s complexity and reliance on existing financial relationships. Among owners who are the sole earners in their household, just 46% reported getting a PPP loan. 
  • The pandemic’s impact on women-owned businesses will be devastating to entire families for generations to come. When these breadwinners’ businesses get crushed, so do the livelihoods of their children, their partners, their relatives, all of those that depend on them. The losses from these women-owned businesses alone have amounted to a $1 billion drop in our investment in children’s futures. The breadth and depth of this devastation — which can take the form of reduced educational investment, housing instability, or increased hunger, to name a few —  will have long-run consequences for this generation to come.

A Picture of Breadwinner Business Owners

Overall, 56% of all women business owners are the sole or primary source of income in their household. This means that for more than half of women business owners, the fortunes of these households rely on their business, so any disruption to business is a disruption in family wellbeing. Among these women, 30% have school-aged children at home, and the majority of these owners (61%) are single mothers. Taken together, these data points paint a picture of a large and important group of entrepreneurs whose families depend on them alone to pay the bills and put food on the table, and who often do not have a spouse or partner in the household who can increase their earnings when slowdowns cut into business revenue. Among these breadwinners with children at home, support is particularly important because, as we will explore below, business revenue shocks translate directly into reduced spending on young children at home, and these measures can have long-lasting effects for generations to come.

Among minority business owners of color, these statistics paint an even more pressing picture. 65% of business owners of color are the sole or primary earner in their household, 35% of these breadwinners have school-aged children at home, and 70% of those with children are unmarried.

Figure 1: Rate of Business Owners who are Sole or Primary Earner, by Race/Ethnicity

Figure 2 plots the industry distribution of survey respondents, separating sole or primary earners from all other business owners, across four large sectors: Personal Services (Retail, Leisure, Hospitality); Professional Services (Legal, Consulting, Information Technology, etc.); Goods-Producing (Manufacturing, Construction, Utilities); and Social Services (Non-Profits, Education, and Health Care). The industry composition of the businesses sole or primary earners largely matches the distribution of other business owners, although there is a higher portion of owners with businesses in the Social Services sector (9% versus 3% for all others).

Figure 2: Industry Distribution of Women Business Owners: Sole or Primary Earners vs. Others

Looking at industry composition just within the group of sole or primary earners, there are interesting differences across the race and ethnicity of business owners. While women of color are slightly less likely to own businesses in personal services and goods-producing sectors, they are significantly more likely to have started a business in the Non-Profit, Education, and Health sectors. Figure 3 plots the industry composition of business owners across white and minority business owners, which shows that nearly one fifth (18%) of minority-owned businesses are in the Social Services sector, compared to 5% of white-owned businesses. These women are not only the breadwinners of their households — with children, partners, other loved ones, and employees who depend on them — but they have started businesses that serve their communities’ needs as well. Likewise, failures to support these businesses will mean reduced access to the important services these businesses provide.

Figure 3: Industry Distribution of Sole or Primary Earners, by Race/Ethnicity

Finally, we examine the differences in employment size among businesses owned by sole or primary earners and then by other owners. On average, businesses owned by breadwinners have nearly two times as many employees as other firms: 14 versus 8 employees among all other businesses. The data shows that this differential is not the result of sole and primary earners owning businesses in industries that normally have higher headcounts. Rather, the most likely explanation for the significant delta in headcount is that these owners need more support given their childcare responsibilities, as the data also shows that 61% of these breadwinners do not have partners at home.

What Drives these Entrepreneurs?

Next, we explore the reasons that drove these women to start businesses, and we compare the heterogeneity of motivations across the earner status of these owners and across race and ethnicity. We asked owners to identify any of several reasons why they started their business, which can be grouped into three categories: passion (pursuing one’s passion), opportunity (improving current or future economic position), or necessity (driven by financial need rather than opportunity). 

Across all owners and sole or primary providers, and across all race and ethnic groups, passion was the most-commonly selected reason for starting a business. These women were driven primarily by a desire to turn a passion into a livelihood. The least-commonly selected group of options was economic necessity — women who started businesses because of a lack of outside economic options — yet these reasons still motivated nearly 1 in 5 women across all groups. 

There is an interesting movement in the likelihood an owner marked any of the opportunity reasons when comparing all owners versus sole or primary earners — and then further among sole earners who have children at home. A significantly higher portion of breadwinners list financial and family reasons for starting a business. While 18% of all female business owners indicated they started their business to pass on to their family, 39% of sole providers with children at home responded that was a reason. Similarly, while 44% of all female business owners indicated they started their business to improve financial opportunities, 57% of sole providers with children did. Clearly, these women are motivated to build something that opens doors to a secure future for themselves and their loved ones.

Table 1: Motivations of Owners to Start Business

How Have these Breadwinners Fared During the Pandemic? Revenue Declines and Federal Support

Although these women owners are forced to balance many plates in any “normal” year, the pandemic and the resulting economic downturn throughout 2020 have turned their lives upside down. These sole or primary earners have reported larger revenue declines than other owners, and yet have also been less likely to access much-needed federal aid. 65% of breadwinners have seen revenue declines, compared to 54% for others, and 56% have seen large revenue declines of 25% or more, compared to more than the 47% reported among all other owners. Among sole earners (excluding those who are the primary but not only earner in a household), the divide numbers become more stark: 66% of sole earners experienced a revenue decline and 58% experienced a large revenue decline. A significant part of this difference is due to the fact that slightly higher portions of breadwinners are in industries hardest-hit by the pandemic, such as the Personal Services and Social Services sectors, rather than Professional Services.

Despite the challenges these businesses have faced over the past year, federal aid programs intended to support struggling businesses did not reach those who needed it. The aid program with the widest reach, the Paycheck Protection Program, extended forgivable loans to 72% of all small businesses according to an external industry survey. Here we find that just 56% of all women-owned businesses and 53% of sole or primary earners reported receiving PPP loans. Furthermore, just 46% of those who are sole (not primary) earners did. 

It is not entirely clear why fewer breadwinners (and even fewer sole earners) received PPP loans, although there are at least three indicative points. First of all, having a prior relationship with a financial institution is one of the best predictors that a business received a PPP loan, and in this survey 74% of breadwinners who received PPP loans did so through their primary bank. Any discrepancy in lending relationships between breadwinners and other owners will translate to discrepancies in receipt of PPP. Second, this program was quite complex, and the eligibility and forgiveness rules continue to be revised nearly a year later. With a household to provide for during a global pandemic, these owners may not have had the bandwidth to sort through paperwork or find a completely new financial institution from which to obtain a loan — particularly considering that they would need to pay back the loan with interest if they did not meet forgiveness requirements. To that point nearly twice as many breadwinners indicated they did not apply for a second-round PPP loan because the paperwork was too complicated (9% versus 5% for others). Finally the even lower rate of receipt among sole earners can be attributed to the fact that a higher percent of sole earners are non-employers (41% compared to 32% among all breadwinners), and these businesses have had widespread issues accessing PPP loans.

Figure 4: Percent of Female Business Owners Who Received a First-Round PPP Loan

Slicing these statistics on business experiences by race and ethnicity, alarming disparities emerge: this pandemic has left few businesses unscathed, but federal aid programs built to avert the devastating effects of the recession disproportionately left out minority business owners who are sole or primary earners. As shown in Figure 5, among sole or primary earners, minority-owned businesses were slightly more likely than white-owned businesses to suffer revenue declines of 25% or more (55% for white-owned businesses versus 60% for minority-owned). Yet, only 34% of minority-owned businesses received a first-round PPP loan, while 63% of white business owners did.

Figure 5: Differences in Revenue Declines and Access to Aid, by Race/Ethnicity

The Billion-Dollar Shortfall in Spending on Children

This disparate effect of this recession on female breadwinners, and the lack of support to these entrepreneurs, is alarming because this devastation will be felt by entire families for generations to come. When these businesses get crushed, so do the livelihoods of their children, their partners, their relatives, all of those that depend on them. And that breadth and depth of impact is hard to recover from: we estimate that this pandemic has resulted in a $1 billion drop in spending on children resulting from the struggles of these sole or primary earning women entrepreneurs alone. 

The median income of sole or primary providers in this survey is $55,000, with an average of 2 dependents in this household. These owners, who often run their businesses to pursue lifelong passions or fulfill a need in the community, do not have a large cushion when times get tough. Furthermore, 61% of these sole or primary earners with school aged children are single heads of household, without an additional adult to act as an informal earnings insurance policy. Nevertheless, we see owners consistently putting business and employee needs ahead of their own in the face of declines in business.

In this survey, we asked owners to identify the actions that they would take if they were not able to secure aid for their business. Table 2 lists selected responses among all owners and among earners who are the breadwinners at home and have school-aged children. Among these breadwinners with children at home, the most commonly-selected response was that owners would delay their own compensation (43% reported they would do so), ahead of “would lay off employees” (40%) or “reduce wages” (25%). These responses, however, also outline the ways in which business disruptions — and lack of government support – can spill over into family disruptions, the effects of which will be felt for years to come. In addition to delaying their own compensation, one in ten of these owners indicated that without additional support they would reduce spending on child care, and one in ten responded they would downsize their home or apartment.

Table 2: If you do not secure enough aid, what actions would you take to keep the business afloat?

These actions are no doubt necessary to keep these entrepreneurs’ primary means of income afloat for the future, but research shows that these negative shocks can also have long-term consequences on children’s outcomes. Rigorous research has found that changes in family income during childhood substantially affect these children’s income in adulthood, their educational achievement, and their long-term mental health

While experts are already concerned about the long-term effects of this pandemic on children — from schooling disruption, hunger, and housing instability — no work has attempted to quantify the effects on children due to these disruptions to female-owned businesses. We calculate the disinvestment children face due to this specific issue by combining survey data with external parameter estimates from academic researchers.

The latest Census data indicates that revenue of female-owned small businesses (those with less than 100 employees) was $993 billion in 2012. Our survey finds that 16% of women business owners are the sole or primary earners of a household with school-aged children at home. Thus, these businesses take in an estimated ($993*0.16 =) $159 billion in revenue. Researchers using business bank account data found that small business revenue dropped 40% in the wake of the COVID-19 pandemic. A 40% drop in revenue in 2020 for these owners equals ($159*0.40 =) $64 billion revenue loss. 

That paper above also found that, as revenue at small businesses fell during the spring and fall, owners reduced their personal spending by 6% of the fall in business revenue. Finally, estimates produced by the Bureau of Labor Statistics BLS data find that expenditures on children make up about 25% of all spending by families in these owners’ income bracket. Scaling the estimated revenue losses by these parameters, we find that the strain of these female business owners has resulted in a ($64*0.06*0.25)  = $1 billion drop in investment in children.

As noted above, the cutbacks that women entrepreneurs have been forced to make can take many forms: reduced spending on childhood education, nutrition, or housing. Whatever the form, these disruptions can impact children’s later life educational attainment and earnings, which in turn reduces aggregate economic productivity, in ways that are difficult to quantify at this point.

Conclusion

This report examines the experiences of female business owners who are the sole or primary source of income in their household. This population of owners represents a significant portion of the economy — 56% of all women business owners. These workers not only are the primary support system for their families, but also drive the economy forward more broadly, employing nearly twice as many workers as business owners who are not the household breadwinners.

Despite their importance to the economy, these businesses have been both more severely affected by the recent recession and less likely to have received support from the federal government. 65% of sole or primary earners reported experiencing revenue declines as a result of the pandemic, but just 53% received a PPP loan. Industry estimates, on the other hand, find that 72% of all small businesses have received a loan from the Paycheck Protection Program. Particularly alarming is the discrepancy in experiences among minority business owners. While 63% of such owners reported large revenue declines (of 25% or more), just 34% received a Paycheck Protection Program loan.

The drop in business revenue and the inability to access much-needed aid programs has resulted in an estimated $1 billion drop in spending on children among these breadwinner women business owners. While these steps have been crucial for women to keep their livelihoods afloat, reductions in investment at childhood in nutrition, educational services, and housing can have long lasting effects on these children’s later-life outcomes.

In this way, support for these business owners, both short term relief and long-term focus on meeting their needs, is among the most effective ways the government can direct its resources. Not only do these owners employ more workers, driving economic growth forward, but their successes translate directly into increased spending on children, which delivers the highest long-term returns of any form of spending. Supporting women business owners who are the sole and primary providers for their households is key to unlocking a recovery that benefits everyone for generations to come. 

Appendix: Methodology

This study surveyed 1,199 members of NAWBO about their businesses and their experiences over the past year. Responses were collected from January 28, 2021 through February 15, 2021. Results presented have been weighted to match the industry composition of female-owned small businesses across the country, using data from the 2019 Census Annual Business Survey.

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Updated: July 27, 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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