The Council commissioned research on sole proprietorships and the factors leading to these firms’ first hires. The purpose was to discover how to best support the employment growth of microbusinesses.
The researchers used panel data from the Panel Study of Income Dynamics (PSID) for 1997-2011 from the University of Michigan, and cross-sectional data from the 2007 Survey of Business Owners from the United States Census Bureau. This study examined barriers to and opportunities for hiring among self-employed individuals and microbusinesses, with a focus on how male and female business owners make decisions to hire employees. The researchers investigated individual characteristics and family dynamics of business owners, firm characteristics, and external market conditions.
For the purpose of this study, the authors define a small business as having 5-9 employees and a large business as having 10 or more employees. A microbusiness has 1-4 employees; this definition is common but not universally accepted. “Self-employed” describes a business owner who may or not have employees.
Key Findings on individual characteristics and family dynamics
Marital Status – Younger and unmarried entrepreneurs are more likely to become self-employed, and more likely to have employees. However, they are also more likely to leave their venture and return to working for someone else. Some individuals within these subpopulations may perceive self-employment as an “occupation” or temporary condition, whereas others are focused on long-term development of an entrepreneurial venture. Women business owners tend to be younger.
Non-traditional Experience – Women who may not have as many opportunities in traditional paid employment display greater entrepreneurial tendencies. For example, women in minority ethnic and racial groups—who may experience discrimination, particularly in middle and senior leadership roles—are more likely have employees than their male counterparts. Women with some college but no degree are more likely to stay self-employed.
Education-level – Post-graduate education significantly increased the likelihood of becoming self-employed and having employees; these effects were particularly notable for women.
Teaming – All individuals, but especially women, were more likely to be self-employed if their spouse was self-employed. Many women business owners may have co-owned a firm with their husbands. Firms that are women-owned but jointly operated by a married couple were twice as likely to have employees; the presence of a co-owner may be of particular benefit.
Family Size – Self-employed women with dependent children at home were less likely to have employees than other women entrepreneurs.
Growth – Women-owned firms were less likely to have employees than other firms, across all industries. This trend was greatly exaggerated in the health care and social assistance, which is noteworthy as over half of firms in this industry are women-owned. Women-owned firms in administrative and other support services were less likely to have any employees—but those that did were more likely to employ more than ten employees.