The Role of Female Entrepreneurs in Boosting Women’s Workforce Participation

A recent study underscores the substantial impact of fostering female entrepreneurship on increasing women’s engagement in the workforce. According to the study, businesses led by women have the potential to stimulate considerable economic expansion by generating additional opportunities for other women. Despite comprising half of the global population, women own under 20% of businesses. This finding was revealed by a World Bank survey conducted across 138 nations between 2006 and 2018. A notable aspect is the way businesses owned by women empower other women. Data shows that only 23% of employees in male-owned companies are women, whereas female-owned businesses employ a significantly higher proportion of women. Furthermore, while only 6.5% of male-owned businesses have a woman in the top management role, more than 50% of female-owned enterprises are managed by women. India presents a particularly difficult scenario, characterized by low rates of female labor force participation and entrepreneurship. The overall count of women in the workforce has shown minimal alteration over the last three decades. However, the landscape for entrepreneurship appears somewhat more favorable. Women constitute approximately 14% of entrepreneurs and possess a considerable share of micro, small, and medium enterprises (MSMEs). As per the 2023 State of India’s Livelihoods Report, they make significant contributions to industrial production and provide employment to a substantial segment of the workforce. Niti Aayog, a government think-tank, indicates that the majority of MSMEs in India are microenterprises, with numerous women-owned businesses functioning as single-person operations. While certain women-owned ventures employ a significant number of staff, most operate with very few employees. Consequently, Indian women are not genuinely under-represented in entrepreneurship; rather, they manage considerably smaller businesses than men, particularly within the informal sector. Predictably, women’s input to India’s Gross Domestic Product (GDP) stands at merely 17%, which is under half of the worldwide average. Furthermore, the Global Entrepreneurship Monitor Report 2021 places India at 57th among 65 countries for women’s entrepreneurship. A recent academic paper authored by Gaurav Chiplunkar from the University of Virginia and Pinelopi Goldberg from Yale University posits that fostering female entrepreneurship has the potential to substantially increase women’s engagement in the workforce, given that female-led enterprises frequently generate additional opportunities for other women. These researchers devised a framework to assess the impediments encountered by women in India as they enter the labor force and pursue entrepreneurship. Their findings indicated significant hurdles to women’s employment and elevated expenses for female entrepreneurs seeking to expand their ventures by hiring staff. Simulations conducted by them demonstrated that eliminating these barriers would invigorate female-owned businesses, enhance women’s participation in the workforce, and stimulate economic benefits through increased wages, profits, and the substitution of less productive male-owned firms with more efficient female-owned ones. Therefore, policies designed to support female entrepreneurship are vital, according to the authors. Mr. Chiplunkar suggests that policies aimed at stimulating entrepreneurship and elevating labor demand – thereby enabling more women to become entrepreneurs – could prove more efficacious and faster than efforts to alter entrenched social norms. Ashwini Deshpande of Ashoka University states, “History tells us that norms are sticky.” Women continue to bear the primary responsibility for most household duties, including cooking, cleaning, laundry, childcare, and elder care. Additional impediments exist, such as insufficient access to secure and efficient transportation and childcare services, which constrain their capacity to work within a reasonable commuting range. A recent study spearheaded by Rolly Kapoor of the University of California indicates that women’s restricted ability to travel autonomously is also a significant element limiting their involvement in the labor market. Although India has observed a recent rise in women’s labor force participation, the outlook is not as encouraging as it might appear, as Ms. Deshpande points out in a paper. She discovered that this increase primarily stemmed from a rise in self-employed women, representing a blend of paid work and disguised unemployment – a condition where more individuals are engaged in a task than are truly necessary, leading to diminished productivity. Ms. Deshpande asserts, “There is an urgent need to increase women’s participation in regular salaried paid work with job contracts and social security benefits. This would be the most important step, albeit not the only one, towards women’s economic empowerment.” This endeavor will not be straightforward. Firstly, numerous women encounter impediments from their families and communities regarding employment in general, irrespective of their entrepreneurial aspirations. Moreover, if a greater number of women enter the workforce without a corresponding increase in available jobs – due to persistent barriers to business creation – wages could potentially decline. Studies reveal that women in India engage in work when opportunities become available, suggesting that the decrease in the labor force participation rate stems from a scarcity of jobs and diminished demand for female labor. A recent report from Barclays Research indicates that India has the potential to achieve 8% GDP growth by guaranteeing that women constitute over half of the new workforce by the year 2030. Fostering female entrepreneurship may offer a solution.