Why female entrepreneurs are key to getting more women to work

Women are crucial to the economy of India, yet their contribution to the country's GDP is only 17%, which is significantly lower than the global average. A recent study emphasizes that promoting female entrepreneurship can greatly increase the number of women participating in the workforce. By creating more opportunities for women, businesses led by women can drive substantial economic growth. It is quite surprising to learn that, despite women making up half of the population, they own less than a fifth of all businesses. This reality was revealed in a survey conducted by the World Bank, which examined data from 138 countries between 2006 and 2018. The findings also highlighted how female-owned businesses tend to empower other women. In companies owned by men, only 23% of the workforce consists of women, while female-owned businesses employ a significantly higher percentage of women. Furthermore, while only 6. 5% of male-owned businesses have a woman in the top management position, more than half of female-owned firms are led by women. In India, the situation is even more complex. The participation of women in the labor force and entrepreneurship is low, with the total number of women in the workforce remaining relatively unchanged over the past three decades. However, the landscape looks a bit brighter when it comes to entrepreneurship. Women account for approximately 14% of entrepreneurs and own a considerable share of micro, small, and medium enterprises (MSMEs). These businesses play a vital role in industrial output and employ a significant portion of the workforce. Most MSMEs in India are microenterprises, and many women-owned businesses are single-person operations, according to a government think tank. While some women-owned enterprises employ a large number of staff, the majority operate with very few workers. A report suggests that India could achieve an 8% growth in its economy if women make up over half of the new workforce. This indicates that Indian women are not entirely underrepresented in entrepreneurship; however, they tend to run much smaller firms than their male counterparts, particularly in the informal sector. It is not surprising that women's contribution to India’s GDP is only 17%, which is less than half of the global average. Additionally, India ranks 57th out of 65 countries in terms of women's entrepreneurship. A new study by Gaurav Chiplunkar from the University of Virginia and Pinelopi Goldberg from Yale University argues that promoting female entrepreneurship could significantly enhance women's workforce participation, as businesses led by women often create more opportunities for other women. The authors developed a framework to assess the barriers that women in India face when entering the labor force and becoming entrepreneurs. They discovered that there are substantial obstacles to women's employment and that female entrepreneurs face higher costs when trying to expand their businesses by hiring workers. Their simulations indicated that removing these barriers would lead to an increase in female-owned businesses, boost women's workforce participation, and generate economic gains through higher wages, profits, and more efficient female-owned firms replacing less productive male-owned ones. There are various barriers, including limited access to childcare, which restricts women's ability to work. Policies that support female entrepreneurship are essential, according to the authors. They argue that policies aimed at boosting entrepreneurship and increasing labor demand—allowing more women to become entrepreneurs—can be more effective and quicker than attempting to change long-standing social norms. Mr. Chiplunkar states, 'History tells us that norms are sticky. ' Women still bear the brunt of household chores, including cooking, cleaning, laundry, childcare, and elder care. There are additional barriers, such as limited access to safe and efficient transportation and childcare, which further restrict their ability to work within commuting distance. The limited ability of women to travel independently is also a significant factor limiting their participation in the labor market, as shown in a recent study led by Rolly Kapoor from the University of California. Despite a recent increase in women's labor force participation in India, the overall picture is not as promising as it may seem. Ms. Deshpande notes that the increase reflects a rise in self-employed women, which is a combination of paid work and disguised unemployment. This situation occurs when more people are employed than are actually needed for a task, leading to low productivity. There has been an increase in self-employed women in places like Darjeeling, India, where a saleswoman is seen accepting money for fresh herbs at her market stall. Ms. Deshpande emphasizes the urgent need to increase women’s participation in regular salaried jobs with job contracts and social security benefits. She believes this would be a crucial step, although not the only one, towards women’s economic empowerment. However, achieving this goal will not be easy. Many women face obstacles from their families and communities that hinder their ability to work, regardless of their desire to become entrepreneurs. If more women enter the workforce but there are not enough jobs available—due to persistent barriers to starting businesses—wages could actually decrease. Research indicates that women in India tend to work when opportunities arise, suggesting that the declining labor force participation rate is a result of insufficient jobs and reduced demand for women's labor. A recent report from Barclays Research states that India could achieve 8% GDP growth by ensuring more women are in the workforce by 2030. Supporting female entrepreneurship could be a viable solution to this issue.