How small-business issues are shaping politics and policy.
Most of us have heard that in the workplace, women are paid less than men. But here’s a surprising corollary, courtesy of a recent study by Babson College: Female entrepreneurs actually pay themselves less than male entrepreneurs pay themselves.
The study surveyed graduates of Goldman Sachs’s 10,000 Small Businesses program. It discovered that not only do women pay themselves smaller salaries than men do but that the gender gap among entrepreneurs also closely mirrors the gap in the wider workplace. According to the Institute for Women’s Policy Research, women’s median weekly wages for full-time work were 81 percent of men’s in 2012. Female entrepreneurs who graduated from the Goldman program had entered it with average salaries that were 80 percent those of their male counterparts.
The result came as a surprise to the author of the study, Patricia Greene, a Babson professor. “That wasn’t even a number we were looking for, so when we saw that, we thought, that’s interesting,” she said. Ms. Greene could not explain the disparity but said she planned to investigate it. “I’m not sure if it’s benchmarking against salaried women, I’m not sure if it’s a lack of confidence, I’m not sure if it’s negotiating themselves down first,” she said. “Sometimes women have a tendency to say: ‘I couldn’t possibly ask that. I’d better recalibrate that before I put that number out there.'”
Ariane Hegewisch, a study director at the Institute for Women’s Policy Research, noted that there was “quite a pronounced gender segregation” in the types of businesses men and women operate. The Babson finding “could be a reflection of the fact that women are more likely to start businesses in sectors with lower average revenue than men,” she said in an email.
Since the introduction of the Goldman program, which began in 2010 and expanded nationally last year, more than 1,500 entrepreneurs have graduated. Just about half are women, and slightly more than a third run professional services firms. About 10 percent of the students come from the construction industry, another 10 percent come from the hospitality industry, and the rest are drawn from a dozen other sectors. Goldman’s students, then, look much like the broader population of small-business owners, except that they have been carefully selected for both ambition and competence. “We look for people who do want to grow their business, and would fit in with a peer-learning environment,” said Ms. Greene, who also devised the program’s curriculum, which includes 80 hours of course work.
The good news, at least for the women schooled by Goldman, is that when they were asked six months after graduating, they had narrowed the salary gap, to 8 percent from 20 percent. Both male and female graduates gave themselves raises, but the women, Ms. Greene said, gave themselves bigger raises.
Ms. Greene attributed this to the opportunities for networking among peers in the classroom, as well as to the instruction. “We’re very interested that business owners pay themselves a salary, because part of growing is being able to support yourself,” she said. “And also if they ever want to get financing, they need to demonstrate that they can pay themselves a livable wage.”
Ms. Hegewisch suggested that women may be more risk averse than men, “keeping more money in the business until they are certain it will work out.” This, she said, would explain the narrowed gap six months later.